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, S C 0 m 0 U S D tftt SIX MONTHS
August 29, 1956

H.ll*
-

I

.

t

CAPITAL MARKET DEVELOPMENTS

Large public security offerings issued for new capital during the
•week ending August 2 I totaled $133 million for corporations and $13 million
t
for State and local governments. This week, just before the Labor Day weekend,
only One corporate and one municipal issue are scheduled. Rights expire
on a $19 million corporate debenture issue and a $12 million tax-exempt
offering is scheduled for sale.
- Bond yields - Yields on all types of outstanding bonds rose sharply
to new highs for the ye_r last week. The increase was particularly sharp for
yields on high-grade issues.
Offering yields on new issues also continue to increase. The recent
Chicago, Illinois Park District offering of A-rated general obligation bonds
provides an opportunity to compare this issue with a siirilar offering made
in May last year. Each issue has an average maturity of 11 1/3 years, with
the longest maturity running to 20 years. Information concerning these two
Chicago issues is summarized below.
Date

Amount of issue
Net Interest Cost
. Yield on 20 year maturity
($ million) . (Avg. for all maturities) UJew Issue
Outstanding 1/

May 2^, 1955
Aug. 28, 1956
• 1/

6.0
12.0

2.21
3.25

2.30
3.15

2.55
3.0lt

As measured by Moody's A municipal bond yield averages.

Net costs to the borrower increased, over this 15 month period,by
10it basis points while the reoffering yield on the longest maturity increased
only 85 points. Yields on comparable outstanding issues rose only b9 basis
points in this period, The widening spread between borrowers* cost, reoffering
yield and the return on existing securities may re£letift underwriters1 reaction
to the difficulties of marketing new securities in a period of rapidly changing
interest rates.
Stock prices - Stock prices, as measured by the SEC index of 265
common stocks, declined sharply last week, closing at 286.7 on August 2b.
Daily figures through Wednesday of this week indicate a further decline in
prices, vdth the daily indexes back to early July levels. Trading volume also
declined the first three days of this week - reaching a six month low.
State and Local Government Security Offerings
in the Second Quarter 1956
Purpose of Issue
New bond issues amounting to $1.6 billion were offered by State and local
governments during the second quarter of 1956, As can be seen in Table 1, this
represents the largest-second quarter volume for any recent year except 195k, when
the heavy turnpike financing contributed to the unusually large volume of issues by
both States and special authorities. Turnpike flotations this year have been much
less than in the peak years of 1952 and 195b, and are down considerable from 1955*




Of the 1956 second quarter total, only $lU million was for refunding
purposes; the remainder represented new capital, tiie most important purposes
for which the new money was intended were school construction ($39l| million),
miscellaneous public service enterprises (#2^5 million, of which the Grant County,
Washington,Public Utility District accounted for $166 million), and sewer and water
facilities ($213 million). As noted above, new financing for highways, bridges
and tunnels was low (Sl59 million); issues to finance the building of residential
housing (tflll* million) were also moderately lower than during the three preceding
second quarters.
Type of Issuer
When securities floated during the second quarter are classified
according to issuing unit, special authorities accounted for the largest volume, .
Authorities -.offered;mors 'than one.-tjaird* of all issues of . 1500,000 or more. . Municipalities-. issued 31%, -and school districts- ac^ousted for,.an additional- 20#. Offerings
amounting to at least §5O0-,OOO ,by each'of;vthese issuing^units exceeded comparable
flotations- during the second quarter of 1955. On the other- hand, offerings ty Statesand counties were small and substantially less than the previous year.
Type of Issue
Two-thirds of the long-term securities issued by State and local governments during the second quarter of 1956 were general obligations; 33$ were 1
"Revenue bonds. Although turnpike financing, which is customarily through revenue
*'issues, fell sharply this year, one large utility bond flotation kept the proportbn
of revenue to total issues about the same as in 1955 second-quarter financing.
This, however, was considerably below the 1952 and 195b proportions, when revenue
bonds made up b0% and kl% respectively of all new issues.
The importance of revenue bonds as a method of financing capital
expenditures varied widely according to the type of issuing authority and the
purpose of the issue. As can be seen from Table 2, special authorities derived
6.1(.% of their new long-term capital from revenue bonds whereas school districts
relied on general obligations for 98% of their funds
In terms of the purpose for which the borrowing was intended, it can be
noted that revenue bond financing provided the bulk of the funds for industrial
buildings (a minor item), for miscellaneous public service enterprises, and for
ports and airports. Highways and sewer and water facilities also acquired a
substantial .portion of their capital-(approximatly two-fifths) from revenue issues.
For other purposes (e.g. schools, recreation and veterans aid), however, revenue
bond financing was either insignificant or was not used.
More detailed information concerning recent capital market developments
is presented in the attached exhibits.
Business Finance and Capital Markets. Section,
Division of Research and Statistics,
^ B o a r d of Governors of the Federal Reserve System.




faTable 1
Long-Term Security Issues of State and Local Governments
2nd Quarter
(In millions of dollars)
1956

16U
53
152
287
1496
165
1,617

Total
Purpose of issues
New capital total

'

Schools
Highways, bridges, tunnels
Residential buildings
Hospitals and institutions
Sewer and water
Misc. public service enterprises
Recreation
- Port and airport
Veterans aid
Industrial buildings
Other
. Unidentified 1/

l j 6

°

1953

25U
13k
363
2 ia
312
125

668
118
I466
2U7
7ii5
129

136
66
299
263

" 151

L05
50
310
170
I4I6
1149

1,1429

2,372

1,1042

1,500

2,33k

39U
159
lilt
15
213
216
6
76
68
3
lh6
165

. 365
226
II4O
28
192
37
111
58
20
3
210
125

502
1,068
133
b3
162
57
. 8
22
25
1
186
127

i m
1416
323
122
hh
•178
30
13
9
10
2
m
153

1,1477
29k
532
73
9
138
55
8
13
98
0

107
1149

23

11

'

1,429

2,372

1,08U
* 533
0

Type of issues
General obligation
Revenue
General revenue 2/

39

1,617

Total

972
457
0

1,217
1,126
0

921l
393
125

897
603
0

1,617

1,1*29

2,372

1,1+1|2

1,500

2 / Total of issues -with proceeds of
million or over.
Note. —Details may not add to totals because of rounding.
Source.—Bond Buyer and Federal Reserve,




52 u

3

•Refunding

Total

1952

195U

I5I4I8 '

Issuing authority:
State
County and tovmship
Municipality
School district
Special authority
Unidentified 1/

1955

30
l,w

1,500

—

-UTable 2

^
**

Distribution of State and. Local Government Security
Issues between Revenue Bonds and General
Obligations
2nd Quarter, 1956
General
Obligations

Issuing authority .
Special authority
State'.
Municipality
County
School district
Total
Purpose of Issue
Total
Industrial buildings
Miscellaneous Public Service Enterprises
Port and Airport
Highways
Sewer and later
^Residential buildings
Schools
Bridges and Tunnels
Recreation
Veterans aid
Other
Source.—Bond Buyer and Federal Reserve.




6k%
12
|
25
5
2
33

100%
100
100
100
100
100

'l
67%

33%
1DD
92
75
kQ
39
10
8
0
0
0
23

Total

36%
58
75
95
98
67

Revenue

-

""o
8
25
60
61
90
92
100
100
100
77

100%
loo"
100
100
100
100
100
100
100
100
100
100

EXHIBIT A

H I G H - G R A D E BOND YIELDS

V\

U. S.
Date

Corporate
Aaa 1/

Old series

Spread between
State and
U. S. Govt,
New series local govt. (old series) and
Corporate1 State and
Aaa 2/
Aaa
1local Aaa

long-term 2/

(Per cent)
1953 - High
Lew
195k - High
Low
1955 - High
Low
1956 - High
Low

3.U2
2.99
3.09
2.85
3.17
2.91
3.U7
3.07

July 27
August 3
August 10
August 17
August 2k

(6/19)
(1/9)
(1/8)
(k/23)
(12/23)
(1/7)
(8/21)
(3/2)

3-30
3-35
3-38
3.U2
3.U7

n.a.
3.15 (6/6)
2.78 (12/26)
2.7U (1/9)
n.a.
2 1 1 (8/7)
.*;
2.9k (8/5) 3.03 (8/5)
2.89 (6/10)
2.62 (V7)
3.21 (8/2U) 3.23 (8/21*)
2.80 (2/17) 2.92 (2/3)

2.73
1.98
2.21
1.90
2.3k
2.05
2.59
2.17

3.02
3.06
3.09
3.1k
3.21

2.kl
2.1*5
2.k7
2.53
2.59

3.10
3.13
3.ill
3.18
3.23

(6/25)
(1/8)
(6/10)
(9/2)
(9/8)
(5/26)
(8/23)
(2/23)

.38
.19
• k3
.32
• 3k
.13
• ko
.13

• 8k
.30
.61
.29 .
•70
.5k
.68
•k5

.28
.29
.29
.28
.26

.61
.61
.62
.61
.62

1/ Weekly average of daily figures. Average term of bonds included is 25-26
2/ Weekly averages of daily figures. The old series includes fully taxable,
marketable 2 1/2 per cent bonds duE or first callable after 12 years through
September 1955, and those due or callable in 10-12 years thereafter; the average
term to first call of the bonds included declined from lb years in early 1953 to
11 1/2 years in early 1956. The new series is comprised of the 3 per cent bond
of 1995 and the 3 l/h per cent bond of 1978-83.
2/ Thursday figures. Only general obligation bonds are included; average
term is 20 years.
Note.—Highs and lows are for individual series and may bo on different dates
for different series.




L O W E R - G R A D E BOND YIELDS
Weekly

CORPORATE Baa

STATE AND LOCAL GOVT.

P T

I

I

I

STATE AND LOCAL GOVT. REVENUE

i iIii 1 K w

RKJ—t—L-l—i

Corporate
. Baa 1/

State and
local govt.

State and
local govt.
rev, j/

LIT

(Per cent)
1953 - High
Low
195U - High
Low
1955 - High
Low
1956 - High
Low

3.89
3.50
3.7U
3.^
3.63
3-U5
3.95
3.58

July 27
August 3
August 10
August 17
August 2k

is

3.90
3.9U
3.95

(9/18)
(1/2)
(1/8)
(12/31)
(12/30)
(1/Hi)
(8M)
(3/9)

2.96 (1/8)

3.27 (6/26)
2.71 (1/2)

3.02 (1/6)

2.72 (8/13)
2.99 (12/30)
2.76 (1/7)

3.79 (6/25)
3.32 (1/7)
2.93 (8/5)
3.26 (12/29)

3.00 (1/1)

3.57 (8/23)
3.20 (3/8)

ts

3.37
3.b2
3.46
3.5U
3.57

3.22
3-31
3.39

m i

s

1/ Weekly average of daily figures. Average term of bonds
included is 25-26 years.
2/ Thursday figures. Only general obligation bonds are
includedj average term is 20 years.
J/ Friday figures. Average rating of bonds included is
between Baa and Aj average term is 20 years.
Note.—Highs and lows are for individual series and may
be on different dates for different series.




Stock price
Index 1/

Stock market customer credit
Common
Trading
Customers
stock
volume 2j
debit bal- loans to
(millions yields
ances h/ "others" 5/
of shares) (per cent)
(Millions of dollars)

167.1
U*1*.0
221.1*
156.5
270.7
217.1*
295.5
257.lt

(1/2)
(9/18)
(12/31)
(1/6)
(12/30)
(1M)
(8/3)
(1/20)

275.5

290.1

293.3
291.lt
286.7

2.5
0.9
3.7
l.l*
1*.6
1.5
3.1
1.6
1.8
2.2
2.3
1.8
1.8

.

5.75
5.15
5.33
1*.20
1.22
3.78
1.21
3.86

2,**
115
2,055
3,1*36
2,1*05
1*,030
3,537
l*,0l*7
3,991.

1,665
1,311*
2,388
1,653
2,805
2,517
2,810
2,71*0

780
66U
1,01*8
71*6
1,21*1
1,018
1,267
1,200

1*.01
3.87

1*,009
1*,026

2,786
2,812

1,223
1,211*
1,201*
1,200

1/ SEC index of 265 common stocks, weekly closing prices, 1939-100; converted
to 1957-1*9*100 by Federal Reserve. The conversion factor is 123.91.
2/ Averages of daily trading volume on the New York Stock Exchange.
~%J Moody's 200 common stocks; end of month figures.
5/ End of month figures for member firms of the New York Stock Exchange which
carry margin accounts; excludes balances secured t y U. S. Government obligations.
>
Wednesday figures for weekly reporting member banks. Excludes loans for
purchasing or carrying U. S. Government securities at banks in New York and Chicago.
Weekly reporting banks account for about 72 per cent of loans to others.
Note.—Highs and lows are for individual series and may be on different datesfor different series.
' -




Exhibit D

H.lli

Corporate and State and Local Government
Security Offerings and Placements
(In millions of dollars)
New capital
19#
January
February
March
April
May
June
July
August
September

579
70U 790

Corporate
1955
1

178
886
687

e/1,120
e/600

597
61*
670
1,162 ^
632
900

2,073
2,790

2,165
2,052
1,911
2,695
8,821

-

.

1954

1956

51*7
U26
635

535
U07
1,223

816
1,11*1*
830

October
November
December
1st quarter
2nd quarter
3rd quarter
kth quarter
Year

I

hok
696
390

1*97
656
8U2
909
335
71*7

1951*

535
312.
538

396
1*11
565

377
1*90
e/730

1*27
350
6ia

73k.
71*8
853

e/380
e/200

1*70
21*9
1*06

279
261
61*9

919
658
1*08

591*
1*23
877

1,385
1,1*18
1,121*
1,981*
5,911

1,372
2,331*
1,188
1,891*
6,789

1,003
290

6oU

.1,6.08
1,995
1,991
1,896
7,^90

State and local
1
1955
1

1,1*90
e/1,597

Excluding finance companies 2/
1st quarter
2nd quarter
3rd quarter
ilth quarter
Year

1,617
e/2,590

1,727
1,870
1,1*31*
2,55k
7,569

1,527
1,927
1,911
1,792
7,158

1/ Includes $637.2 million AT&T convertible debenture issue.
2/ Total new capital issues excluding offerings of sales and personal finance
companies.
.
Note.—Details may not add to totals due to rounding.

m




H.lU

Exhibit E
Large Public Security Issues for New Capital
(Other than U. S. Treasury) 1/
Proceeds of Large Issues Offered
(Millions of dollars)

Corporate

Month

State and
local government

101
hOS
328
805
221
263
95
212
278
395
#3
185
592

1955 - July
. August
September
October
November
December
1956 - January
February
• March
April
May
June
f ,
July

278
65
23U
716
hOl
227
192
. 1M
163
157
2%
163
16U

Other 2/

'

25
50

50
20

Large Individual Issues Offered August 1 through August 2k

Issuer

Type 2/

Coupon
Amount
rate or. Offering
Onillions
Maturity
net interyield
of
est cost
dollars)

Rating

CORPORATE
El Paso Natural Gas Co.
Pfd. stk.
Consumers Power Co.
1st mtg. bds.
Pacific Tel. & Tel. Co.
Deb.
Minneapolis -Honeywell Co. S.F. deb.
Associates Investment Co.
Deb.

25.0
hO.O
78.0
25.0
30.0

1986
1988
1976
1976

1
+
L3/8
3 3A
h 1/2

3.9U
U.23
3.79
U.38 .

Aaa
Aa
Aa
—

STATE & LOCAL GOVERNMENT
Suffolk Co., New York
' State of Delaware
: Yonkers, New York

G.O.
G.O,
G.O.

-

9.3
7.0
6.U

1957-81
1957-76
1957-76

2.95
2.6k
3.29

2.00-3.00
2.00-2.65
2.30-3.25

A '
Aa
A

36.5

1957-86

U-U 1/8

3.60-1*.1*0

A

OTHER
., Metropolitan Toronto




Deb. ^

1/ Includes corporate and other security offerings of $15 million and over; State and local government security offerings of $5
million and over,
2/ Includes foreign government and International Bank for Redone
struction and Development issues.
2 / In the case of State and local government securities, G.O.
denotes general obligation; Rev., revenue bonds; G.R., general obligations additionally secured by facilities revenues; L.L., limited liability obligations; secured by pledge of designated revenues.




Exhibit F

H.Ik

Forthcoming Large Public Security Offerings for. New Capital
(Other than U. S. Treasury) l/
Expected Proceeds from Forthcoming Large Issues
During month following
date shown
State and Other 2/
Corporate
local govt.

Date of
computation

1 9 # - July 29
Aug. 31
Sept. 30
Oct. 31
Nov. 30
Dec. 30
1956 - Jan. 31
- Feb. 29
Mar. 30
Apr, 30
May 31
June 30
July 31

k07
222
805
202
215
70
176
123
380
568
198
2*37
2k7

100
18U
8U3
330
205
121
327
220
132 ...
173
332
81

Subsequent to""
Corporate

50
— "

37

—

1,135
920
909
1*12
230
85
376
233
1,013
818
m
567
1,096

State and Other 2/
local,govt.
2,018
1,971
2,205
1,650
756
618
917
785
811
832
9U1
690
726

50
—
——

37

Forthcoming Large Offerings, as of August 2lt

Type

Issuer

CORPORATE
Mack Trucks, Inc.

Amount
Approximate date
(millions
of offering
of dollars)

•

S.F. deb.

19.2

Gulf States Utilities Co.
General Telephone Co. of Calif.
Northern States Power Co.
^Procter & Gamble Co.
Detroit Edison Co.

1st mtg, bds.
1st mtg. bds.
1st mtg. bds.
Deb.
Conv. deb.

15.0
20.0
15.0
70.0
59.8

^Southern Pacific R.R. Co.
North American Aviation, Inc.

1st mtg. bds.
Cap. stk.

Uo.o

^Virginia Electric & Power Co.
New England Tel. & Tel. Co.

1st mtg. bds.
Cap. stk.

20.0
18.9

^Southern California Edison
American Tel. & Tel. Co. 3/
J T P . Stevens & Co.




Common stk.
Common stk.
S.F. deb.

35.0

25.0
580.0
28.7

August 30
(rights expire)
September 10
September 11
September 12
September 13
September lU
(rights expire)
September 19
September 2h
(rights expire)
September 25
September 28
(rights expire)
September
November 5
(rights expire)
1956

H.lU

F-2
Forthcoming Large Offerings., as of August 2k (Cont'd)

Issuer

Type

Amount
Approximate date
(millions
of offering
of dollars)

CORPORATE (Cont'd)
CIT Financial Corp.
Pacific Finance Corp.
Michigan Wisconsin Pipe Line Co.
Southern California Edison Co.
Commercial Credit Co.

Deb.
Deb.
1st mtg. bds.
1st nitg. bds.
Notes

75.0

25.0
25.0

1*0.0

50.0

1956
1956
1956
1956
1956

STATE AND LOCAL GOVERNMENT
Chicago, 111., Park District
*Port of New York Auth., N.Y.
^Allegheny Co. Inst. Dist., Pa.
Oakland Unified School Dist., Cal.
Los Angeles School Lists., Cal.
Jacksonville Expressway Authority
Memphis, Tennessee
Washington State Toll Bridge Auth.
Florida State Turnpike Authority
Oklahoma Turnpike Authority
Pennsylvania Turnpike Commission
Washington State Toll Bridge Auth.
Inter-American Center Auth., Fla.
New Jersey Highway Authority
New York State Thruway Authority

G.O.
G.O.
G.O.
G.O.
G.O.
Rev.
Elec. rev.
Rev. *
Rev.
Rev.
Rev.
Rev.
Rev.
Rev.
G.O.

12.0
25.0
6.3

10.0

29.0
U2.0
135.0
5.1*
185.0

65.0

62.0
227.0

70.0
25.0

50.0

August 28
September
September
September
September
September
September
Fall
Fall
1956
1956
1956
1956
1956
1956

6
11
11
18

OTHER
None
Included in table for first time.
1/ Includes corporate and other issues of $15 million and over; State and
local government issues of $5 million and over.
2/ Includes foreign government and International Bank for Reconstruction
and Development issues.
3/ Subject to stockholders' approval on September 5, 1956.





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102