Full text of H.16 Capital Market Developments : February 13, 1961

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Not for Publication

DECONTROLLED AFTER SIX MONTHS

H.llt

February 13, 19.61.
' DEVELOPMENTS
ES AND CANADA.
(Including Monthly Review of Financial
Developments in the United Kingdom)
Part I - United States

The volume of large public security financing for new capital
was quite small during the week ending February 10, but is expected to
be much larger this week, particularly for corporations. Last week,
one large utility issue for $k5 million and two State government issues
with total proceeds of $23 million were sold. One of the State and
local government issues—$12.5 million by the Texas Veterans' Land
Board—had been originally scheduled for sale in early December, but
postponed in anticipation of better market conditions.
The calendar for this week includes corporate issues with
aggregate proceeds of $21f> million and State and local issues totaling
# 8 million.
^
Long-term bond yields - Yields declined last week for all
categories of outstanding bonds. Yields on corporate and U. S. Government bonds reached new lows for the year, while those on State and
local government bonds remained slightly above their early January levels.
A new A-rated first mortgage electric utility bond issue was
offered to investors la-jt week to yield lt.60 per cent—b5 basis points
below the yield for the last comparable issue, an offering made in midNovember.
.
Short- and intermediate-term interest rates - Rates on
Treasury bills—both 3-month and 6-month—increased to new highs for .
the year. Yields on intermediate-term Government -issues and rates on
3 to 6 month directly placed finance company paper declined slightly.
Other major short-term money rates were unchanged.
Mortgage and bond yields - Average secondary market yields
on selecteTlInseasonecri?-37uper™l*ent FHA new home mortgages declined
It basis points in January to 6.00 per cent. Yields on new corporate
bonds declined much more and the spread between mortgage and bond
yields widened to 165 basis.points.
FHA rates and FNMA purchase prices - As announced in the
President's Economic Message to Congress of February 2, the Federal
Housing Administration reduced from 5-3A to 5-1/2 per cent the
maximum permissible interest rate on home mortgages insured under
most of its programs. The new maximum applies to all mortgages insured




pursuant to applications received after February 1. At the same time FNMA
raised by one-half point the price at which it puionases mortgages, lowering the corresponding yield.
The Federal National Mortgage Association established a new
schedule of buying prices for JHA mortgages junder both the Secondary
Jfeiket Operation and the Special Assistance Function and reduced the
amount of FNMA stock that sellers will be required to buy under the
Secondary Market Operation from 2 per cent of the mortgage amounts
involved to 1 per cent. The new Secondary Market prices set for mortgages for immediate delivery are: for 5-1/2 per cent mortgages; 98-1/2
to 96-1/2; 5-3 A per cent mortgages, 100-98-1/2; and 5-lA per cent
mortgages, 96-1/2 to 9k-l/2. Purchase of k-3/k per cent mortgages has
been discontinued.
Stock prices - Standard and Poor's index o'f500 common stocks
closed at 61.50 on February 10, one per cent lower than a week earlier.
Trading activity, continuing to be very heavy although somewhat less than
the previous week, averaged k»7 million shares a day.
More detailed information concerning recent capital market
developments is presented in the attached exhibits.
Developments in the Canadian capital market are presented in
Part II of this report and a special review of financial developments
in the United Kingdom is appended.

Capital Markets Section,
Division of Research and Statistics,
Board of Governors of the Federal Reserve System.




\X
_EXHI6IT A

LONG-TERM BOND YIELDS

HIGH-GRADE




/Vf
U.S. 60VHMMEHT
V\t; - - lona-ierm

l , f

Exhibit B - Tables for Exhibit A

-5-

Long-term Bond Yields
High-grade

Date

Corporate
Aaa 1/

State and
local
government
Aaa 3/

U. S. Govt.
long-term 2/
(per cent)

19!>1* - Low
1957 - High
1958 - Low
1959-60 - High
1961 - High
Low

3.92* (1/20)
k.3k (1/6)
it. 28 (2/10) 3.81 (2/10) -

Jan.
Jan.
Jan.
Feb.
Feb.

L33
it. 32
it. 31
iu 30
4.28 y

13
20
27
3
10 e/

2 . 8 5 (4/23)
it. lit (9/27)

2.1*5 (8/6)
3.76 (ioAe)

3.55

3.07

U. 6 1

(5/2)
(1/29/60)

•

3.16 (2/2)
J.13 (1/5)

.30
.60
.22
.59
.50
.hO

.30
.50
.31*
.92
.76
.70

3.H*
3.16
3.16
3.16
3.H

.1*3
.1*0
.1*2
.1*2
.1*1*

.76
.76
.73
.72
.70

1.90

(9/2)

2.61:

3.U5

(8/29)
(5/1)

3. 6 5

(9/24/59)

(4/25)

1*.1*2 (1/6/60)

3.90
3.92
3.89
3.88
3.81

Spread between
U. S. Govt, and
Corporate State and
Aaa
local Aaa

Lower grade

Date

lZ,
Corporate
Baa 1/

State and
local
government
Baa 3/
(per cent)
2.93 (8/5)
1*.51 (8/29)

1951* - Low
1957 - High
1958 - Low
1959-60 - High
1961 - High
Low

5.12 (1/27)
5.07 (2/10)

L09.(2/2)
i*.03 (1/5)

Jan.
Jan.
Jan.
Feb.
Feb.

5.10
5.11
5.12
5.10/
5.07/

i*.oi*
it. 09
JU. 09
i*.09

13
20
27
3
10 2/

E/ Preliminary.
1] Weekly average of
2/ Weekly average of
3/ Thursday figures.
Note.—Highs and lows

3.1*1* (12/31)
5.10

(11/29)

l*.5l (7/11)
5.36

(2/12/60)

3.61* (5/1)

Lil6 (1/7/60)

l*.o5

Spread between
Aaa and Baa
State and
Corporate
local govt.
.52
1.27
.77
.81*
.til
.71*

.96
1.21
.93
1.08
.93
.90

.77
.79
.81
.80
.79

.90
.93
.93
.93
.91

daily figures. Average term of bends Included Is 25-26 years.
dally figures. The series includes bonds due or callable in 10 years or mere.
Only general obligation bonds are included; average term la 20 years.
are for individual series and may be on different dates for different series.




SHORT-

AND

INTERMEDIATE-

TERM

INTEREST

RATES

GOVERNMENT

3 - S YEAI ISSUES

4 - MONTH IIUS I
KAIKT YIHDSA/j

PRIVATE




STOCK EXCHANGE
CAU LOANS
Going Hale —.

FINANCE COMPANY

PAPEI

foiretlly Placed"

Exhibit D - Tables for Exhibit C

• -7-

Short- and Intermediate-tenn Interest Fates
Government
Discount
rate
%-month
1/
/bills 2/
vi,
1.50
?•; 195U - Low
1957. - High
3.5o
% 1958 - Low
1.75
;r 1959-60 - High 4.00
n.a.
\r 1961 - High
n.a.
^
Low
4 Jan.
Z Jan.
'Jan.
i Feb.
4 Feb.
i

13
20
27
3
10 £/

Yields
6-month
bills 2/
(per cent)

Spread between yields on
3-5 year 3-month bills and yields on
issues 2/ 6-mo. bills 13-5 yr. issues

.61 (6/11)
1.66
3.6U (ioAe)
it.Oit
3 . 02 (12/26) 2.1k
.58 ( 5 / M )
5.07 (1/8/60) 5 . 0 0
2.55 (2/10) 3.59
2.17 (1/27) 2.12 (1/27) 3.39

3.00
3.00
3-00
3.00
3.00y)r

2.28
2.25
2.17
2.29
2.35/

2.51

3.56

.26

(12/24/69)

(1/20)
(1/6) •

3.52
3.59
3.57

2.1x6

2.12
2.k9
2.55

.66
.86

(4/30)

(10/18)
(6/6)

-

.OU

1.81

.79
.25
.20

lAo

1.11
1.21

.23
.21
.25
.20 •
.20

1.3U
l.ko
1.28
1.21

5
Stock Exchange
call loan 1/

Prime
rate 1/

paper

(per cent)
% 195k - Low
4" 1957 - High
t 1958 - Low
1959-60 - High
: 1961 - High
Low
Jan.
Jan.
Jan.
Feb.
Feb.

13
20
27
3
10 d/

1.25 (12/31)

3.00
it. 50
3.50
5.50

1*50
3.50
5.oo

it.5o
it. 5o
it. 50
it. 50
it. 50

it. 5o
it. 50
it. 50
it. 50
it. 50 ^

1/

*

3 . 8 8 (11/15)

1.13
5.13
2.83
2.63
2.81
2.81
2.71"
2.6k
2.63

(0/8)
(l/WCO)
(1/6)
(2/10)

Spread between 3-month
Treasury bill yield and
finance company
paper rates
0

(12/18)

.63 (U/22)
-.35 (u/2'j)
1.02

(3/25/60)

.56 (1/20)
.28 (2/10)

i
.28

Weekly rate shown Is that In effect at end of period. Dlocount rate is for Federal Reserve Bank of Hew York.
Stock Exchange call loan rite Is going rate on call loans secured by ouatoaiors' ctock exchange collateral at
New York City banks. Prime rate Is that charged by large banks on short-term loans to buslines borrowers of
the highest credit standing.
2/ Market yield) weekly averages computed from daily closing bid prices. Series of 3-5 year issues consists of
selected notes and bond*.
3/ Average of dally rates published by finance companies for directly placed paper for varying maturities in the
90-179 day range.
H o t « H i y h s and lows are for Individual series and may be on different dates for different series, For spreads,
high refers to widest, and low to narrowest.




STOCK

MARKET

MORTGAGE AND

BOND




YIELDS

Exhibit F - Tables for Exhibit E
Stock Market
Stock price
index 1/

Date

Common
stock
yields 2/
(per cent)

Trading
volume J/
(millions
of shares)

Stock market customer credit
Customers1
Bank
Total
debit bal- loans to
ances 1*/ "others" 5/
(In millions of dollars)

1957-60 - High
Low
1961 - High
Low

39.18 (12/20/57)
62.22 (2/3)
58.1*8 (1/6)

3.08
k.72
3.12
3.32

1*.9
1.1*
1*.9
3.6

4,76b (V59) 3,1*01 (4/59) 1 , 3 7 3 (5/59)
3,551A (1/SS). 2,1*82 (12/57) 1,060 (11/57)
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

December
JanuaryJan. 27
Feb. 3
Feb. 10 2/

56.80
59.72
61.2k
62.22
61.50

3 . a

3.7
1*.2
k.h
h.9
1*.7

1*,1*06

3.28'
3.18
3.12
3.17

6 0 . 5 1 (7/31/59)

3,222
n.a.
n.a.
n.a.
n.a.

n.a.
n.a.

1,181*
1,163
1,163
l,lbti.

n.a.

n.a,-e.Not available.
jg/ Ppnlln-ifcary.
1/ Standard and Poor's composite index of 500 ocsmon stocks, weekly oloolis prlo*9, 1941-43=10. Monthly data are
averages of dally figures rather than of Friday's only. Hlgh:i and lows are for Fridays' data only.
2/ Standard and Poor's ocmposite stock yield baoed on Wednesday data converted to weekly closing prices by Federal
Recerve. Yields ahotm are for dates on which price Index reached its high or low.
3/ Averages of dally trading volisie on the Nev York Stock Exchange.
4/ End of month figures for member firms of the Han York Stock Exchange which carry margin accounts; excludes balances
secured by U. S. Government obligations.
5/ Wednesday figures for weekly reporting member banks. Excludes loans for purchasing or carrying U. S. Oovernnent
rocurlties. Prior to July 1, 1959, such loans are excluded only at banks In Mow York and Chicago. Weekly reporting
banks account for about 70 per oont of loans to others. For further detail see Bulletin.

Mortgage and Bond Yields 1/
Spread between now
Aaa corporate
corporate bonds and
bonds 1/
New 3/ |Seasoned h/ FilA mortf/aftes | Seasoned bonds
1953-58 - High
Low
1959-60 - High
Low

5.63
1*.56
6.21*
5.57

1960 - September
October
November
December
1961 - January

6.11
6.09
6.05
6.01*
6.00

v

are paid off in 12 years.

(11/57)
(2/55)
(1/60)
(3/59)

1*.12
2.81* (V51*)
l*.6l (1/60)
1*.12 (1/59)

1.96
.51*
1.7 6
.83

.90
-.12
.77
.08

1*.1*5
1*.60
1*.59
1*.79
1+.35

1*.25
1*.30
1*.31
1*. 35
1*.32

1.66
1.1*9
1.1*6
1.25
1.65

.20
.30
.28
M
.03

Danhed

rated Aaa, Aa or A by Moody

a.

l*.8l (6/57)
2.71* (3/5L)
5.29 (9/59)
1*. 29 (2/59)

n inuu.ii.riM w m y

Invent or a Service. Monthly
Digitized 4for
/ M oFRASER
ody'1


Yields on Aa and A issues are first adjusted to an Aaa basis

a v e r t s of dally data.

D

See Exhibit B e

:r

(-

Exhibit G
Long-term Corporate and State and Local Government
Security Offerings and Placements
(In millions of dollars)

1961
January
February
March

New capital
Corporate 1/
State and local 2/
I I960
1961
1 I960
1 1959
1 1959
577
715
860

e/500
,6/ f

April
May

766
567
1,03k

July
August
September

quarter
quarter
quarter
quarter

1st half
Three quarters
Year

89k
785
887 .

e/725
e/500

739
623
582
731
550
1,033

639
858
646
932
#3
1,006 .

727
962
738

535
7I4O
703

572
602
689

567
516
465

p/965
2/927
e/850

879
864
900

339
502
2/481

597
519
455

2,151
2,367
2,127
e/2,7U2

2,204
2,567
1,979
2,642

1,943
2,316
1,863
2/1,322

2,143
2,531
1,548
1,571

1,519
6,945
e/9,687

4,771
6,750
9,392

4,259
6,122
2/7,444

4,674
6,222
7,793

October
November
December
1st
2nd
3rd
4th

821
738
646

including finance companies y
1st
2nd
3rd
4th

r

quarter
quarter
quarter
quarter.

Year

1,722
2,150
2,017
e/2,3li2

1,999
2,412
1,716
2,503

e/8,231

8,630

Estimated.
£/ Preliminary.
Securities and Exchange Commission estimates of net proceeds.
Investment Bankers Association of America estimates of principal amounts.
Total new capital issues excluding offerings of sales and consumer finance
companies.




-11-

Extdbit H

ti.ll*

Other Security Offerings 1/
(In millions of dollars)
Long "tern
Federal arency 3/
Foreign government 2/
I960
1 1959. 1 1958
I960
I 1959
1'
January
February
March '
April
May
June

2 *
175
70

81
60
2

196
53

3h

•5°
58

139
198
120

/ 72
1*0

July
August
September

25 '
136

October
November
December

3U
2,

Year

k2

—

9

85
1
35.

182
150
150

5
17

199

33
30
70

58
123

7k

160
11*9
2/181

5U7

992

2/1,673

;

190
428
295

l a
297

563
lill
215

280
505
199

21*6
167
399

251
h99
|/215
3/3,912 .

k,179

523
—

—

—

96
150

,
—

220

•esee "

. --

86
,70?

--

2,321

Federal agency 3/

233
160
273

1*79
1*75
511

359
500
1*89

371
208
lW*

§

509
135

1*86
075
2.89

209
161
329

1*68
'296

727
365
665

.1*37
206
336

261*

1
1

IU

.358

—

\

16U

State and local government U/
268

175

U18
351*
—

1958
1,163
251

199

3,910

:,.2B
282
177.
S/U,817

' !8 a
288

137

6,0h7

3,09a

-4fi/ Prellmlnaiy,
y Data presented In thle exhibit differ fren these In Bthlblt B tn ttat re fun-Unit istuna, an well as new
wpltal issues, are included. . Long-term securities are defined as those
in m^re than one year.
2/ Includes securities offored in the United States by foreign govoWxionfca and their eubdivisions end by
International organisations, "(Hires« Securities and Xxahr.nge Cotwilsslor..
" 3/ issues not guare»t«ed ty the U* S. Ooyirimr.t-. Source« leny-tun, Securities and Rtchangt Cerent nil oni
short-term. Federal Reserve.
y
i
W
Principally tax and bond anticipation not*a, warrants or eertlfleates ar.d Public Housing Authority
rwtfs.- In some Instances PHA rates tneltided may have a soeenhat longer t«t«s than one year. Source: Bond Buyer.-




Exhibit I

-12-

Large Long-tem Public Security Issues for New Capital
(Other than U. S. Treasury) 1/
Proceeds of Large Issues Offered
(In millions of dollars)

Corporate

Month

I960 - January
February
March
-April
May

State and
local government

July
August
September
October
November
December
1961 - January

100
320
191
71
28
30

388
283
225
. 370
231*
561
191
298
3%
1*6
186
222
391

279
262
' . 38k
309
. 139
1*1*2
303
581
266
566
1*65 ^
260
11*7

Other 2/

75
25
77
150
99

Large Individual Issues Offered February 1 through 10
Type y

Coupon
Amount
rate or Offering Rating
(millions Maturity
net inter- yield
of
est cost |
dollars)

CORPORATE
2*5.0

1986

G.O.

29.O

196U-80

2.83

1.90-3.10

G.O.
Rev.-Ut.

11*. 0
. 10.3

1963-89
1962-81

3.30
2.87

•1.70-1*. 00
1.50-3.15

Consolidated Natural Gas Co
STATE AND LOCAL GOVERNMENT
State of Connecticut
Houston Ind. Sch. Dist.,
Texas
Milwaukee Co., Wise.
Kentucky Turnpike Auth.
Term
Serial
Chicago - O'Hare Int'l
Airport
State of North Carolina
State of Texas

U-3/8

Rev. -Rent.
Rev. -Rent.

21.2
17.8

1965-81*

2000

1*.86

Rev.-Ut.
G.O.
G.O.

25.0
10.0

1999
1962-80

1*.66

OTHER
None




12.5

1966-96/75

2.86
3.26

1.33

1*.80
3.50-1*. 60
l*.5o

1.1*0-3.00
2.10-3.1*0

A
Aaa
—

Aaa
Aa

1-2

-13"

Footnotes
1/ Includes corporate and other security offerings of $15 million and over5 State
and local government security offerings of $10 million and over.
2/ Includes foreign government and International Bank for Reconstruction and
Development issues and non-guaranteed issues by Federal agencies.
2/ In the case of State and local government securities, G.O. denotes general
obligations; Rev.-Ut., revenue obligations secured only by income from pubLic
utilities; Rev.-Q.Ut., revenue bonds secured only by revenue from quasiutilities j Rev.-S.T., revenue bonds secured by revenue from specific taxes
only; Rev.-Rent., revenue bonds secured solely by lease payments.




—illForthcoming Large Long-term Public Security Offerings for New Capital
(other than U. S. Treasury) 1/
Expected Proceeds from Forthcoming Large Issues
Subsequent to
date shown
State and
Other 2/ Corporate local govt. Other 2/
local Svt.

During month following
date shown

Date of
computation
1960 - Jan. 29
Feb. 29
Mar. 31
Apr. 29
May 31
June 30
July 29
Aug. 31
Sept. 30
Oct. 31
Nov. 30
Dec. 30
1961 - Jan. 31

207
301
299
202
183
237
596
216
576

ao

210
255
259
2l*3
277
180
275
283
212

258

260

21*2

is-

181

1*5
35
30
30.
77
5b

1*12

310
385
280
258
502
380
321*
283
336
391
560
682
360

372
372
3kh
357
553 .
bSS
1,006 •
731
836
585
335
1,036
1,01*6

1*5
35
60
30
127
50

Forthcoming Large Offerings, as of February 10
Type

Amount

L

.

7

7™

CORPORATE
Southern Co.
Chesapeake & Potomac Telephone Co.
Pug'et Sound Pwr. & Light Co.
General Motors Accept. Corp.
American Machine & Foundry Co.

Com. stk.
Deb.
1st mtg. bds.
Deb.
Conv. deb.

30.0
20.0
15.0
150.0
1*0.5

-^-Southwestern Public Service Co.
American Telephone & Telegraph Co.

1st mtg. bds.
Com. stk.

15.0
e/800.0

Commerce Oil Refining Corp.
Realty Collateral Corp.

Deb., bds. & com.
Coll, tr. notes

1*5.0
20.0

Feb. 15
Feb. 16
Feb. 16
Feb. 17
Mar. 16
(rights expire)
Mar.
Apr. ll*
(rights expire)
Indefinite
Indefinite

STATE AND LOCAL GOVERNMENT
St. Louis, Missouri
Baltimore, Maryland
Dallas, Texas
-x-Alabama Education Auth.
^Prince Georges Co. , Jjd.
-:.-Shelby Co., Tenn.
-;:-New York State Power Auth.
Denver, Colorado
State
of New Jersey

St. Paul, Minnesota



G.O.

0.0.

G.O.
Rev.-Q.Ut.
G.O.
G.O.
Rev.-Ut.
G.O.
G.O.
G.O.

15.8
32.6
19.0
30.0
11.1*
11.0
100.0
15.0
20.9
10.6

Feb. 15
Feb. 15
*eb. 20
Feb. 28
Feb. 28
Feb. 28
Mar. 1
Mar. 7
Mar. 7
Mar. 8

J-2

-15-

Forthcoming Large Offerings, as of February 10 (Cont'd)
Issuer

Type

1 Amount
Approximate date
I(millions
of offering
lof dollars)

STATE AND LOCAL GOVERNMENT (Cont'd)
Los Angeles Dept. of Wtr. & Pwr.,
California
Orleans Parish School Dist., La.
Dade County, Florida
New York State Housing Fin. Agency

Rev.-Ut.
G.O.
G.O.
Rev.

12.0
10.0
1*6.0
100.0

Indefinite
Indefinite
Indefinite
Indefinite

OTHER
None
v
*—Included in table for first time.
ej Estimated.
1/ Includes corporate and other issues of $1$ million and over; State and local
government issues of $10 million and over.
2/ Includes foreign government and International Bank for Reconstruction and
Development issues and non-guaranteed issues by Federal agencies.
Note.—Deletions for reasons other than sale of issue: None.




Exhibit K
Yields on New and Outstanding
Electric Power Bonds, Rated Aa and A 1/
Aa-rated offering yields A-rated offering yields
Amount above
Amount above
Actual
seasoned yields Actual seasoned yields
(per cent) (basis points) (per cent) (basis points)

Date

1952-1959 - High
Low

5.30 (IJ/8/59) 87
2.93 (3/31/54) -8

1959 - Oct.
Nov.
Dec.
1960 - Jan.
Feb.
Mar.
Apr.
May
June
July 8
^
13
Sept. 15
23
28
Oct. 5
21
Nov. 4
16

11
Dec. 7
1961 - Jan. 12
18
25
Feb. 8

-

5.132/
*5.08
*5.30

36
42
63

5.09 * •
4.82
4.91*4.88
4.83

45
25
37
32
26

4.672/

22

4.78
4.85

33
40

5.00
4.6o
4.55
4.44

49
11
7
-2

5.65 (9/18/59) 123
3.00 (3/17/54) -15
5.33

43

5.45.,
*5.30=/

51
28

4.97
5.14
5.15
*4.95
4.93
4.88
4.80

9
35.
29
11
11
8
24

4.88

26

5.05

43

4.6o

-2

*—Single observation, not an average.
1/ Covers only 30-year first mortgage bonds, as reported in Mooter's Bond Survey.
Except where indicated, the actual yield figure and the amount above seasoned
yields are averages of offerings during the indicated period and of the differences between these new offering yields and yields on seasoned issues of similar
quality for the same day. Average maturity for the seasoned issues varies from
26 to 28 years.
2/ Provides for a 5-year period during which issue may not be called for refunding
at a lower coupon rate. Monthly averages so marked include one or more issues
with such a provision. Other issues have no such provision.
-




February 11, 1961
Part II - Canada

-17-

There was a slight easing of interest rates in Canada during
the week. However, the yield on the Canadian 3-month Treasury bill
covered for forward arbitrage, continued to exceed the yield on the U.S.
bill by almost one"half of one per cent. The Bank of Canada showed little
change in its holdings of Government securities during the week, but made
some small switches from bonds to Treasury bills, while the chartered banks
increased their holdings of all Government securities and the general
public made net sales» Industrial stock prices began to level off early
in February but remained over one per cent above the high of early I960.
The Canadian dollar showed little fluctuation during the week and closed
just below 101.2 (U.S. cents) last Thursday.
Money market. The average yield on the Canadian 3-month and
6-month Treasury bills eased slightly at last Thursday's auction. The
3-month bill declined 3 basis points to 3.10 per cent on February 9 compared with 3.13 per cent on February 2. The 6-month bill declined 5 basis
points to 3.U3 per cent on February 9 compared with 3.U8 per cent on
Febrilaify 2. During the week the chartered banks purchased $33 million of
Treasury bills while the general public sold $31 million and the Government
Accounts sold $7 million. The Bank of Canada purchased $5 million of bills
during the week.
The net incentive to hold the Canadian 3-month Treasury bill
over the United States bill declined slightly as a result of the narrowing
of the spread between the bill yields as the U.S. yield rose slightly and
the Canadian yield declined slightly. There was no change in the discount
on the forward Canadian dollar and the incentive to hold the Canadian
bill on a covered basis was 0.U9 per cent compared VLth 0.57 the week before.
Bond market. Yields on Government bonds eased slightly last
week. The spread between selected comparable Canadian and United States
securities (Thursday yields for bills and Wednesday yields for bonds) were
as follows (figures in parenthesis refer to the previous week):
0.7k
0*86
0.89
1.32
1.55

per
per
per
per
per

cent
Cent
cent
cent
Cent

on
on
on
on
on

a 91-day bill (0.82)
a 182-day bill (0.98)
an 8-year bond (0.82)
a 30-year bond (1.29)
a 35-year bond (1.50)

During the week the chartered banks purchased $8 million of bonds while
the general public sold $6 million and the Bank of Canada sold
million.
Stock market, Prices of industrial stock on the Canadian exchange
continued to rise through the week ending February 3, but fell off slightly
on February 3 and February 6, still about 1.5 to U.5 per cent over the
high of I960. The total value of shares sold on the Canadian exchanges
during the week ending February 3 was $9.8 million compared with the $10.6
million high of several weeks ago.




-18-

New York
Standard & Poor

Toronto

Montreal

I960 - High
Low

532.$6
672.36

277.1
250.3

61.19

1961 - Jan. 3
17
23
Feb. 2
3
6

52U.13
535.9U
5U2.08
5UU.13
5U2.81
510.69

-276.1
287.0

60.87
62.77
63.86
65.89
65.81
65.31

292.5

293.6
291.8
289.9

55.98

Foreign exchange. The spot rate on the Canadian dollar fluctuated
within narrow limits through the week around 101 (U.S. cents). On Thursday,
February 9, the Canadian dollar closed at 101.16 (U.S. cents). There was
little change in the discount on the forward Canadian dollar at about
0.25 per cent per annum.

British Commonwealth Section
Division of International Finance
Board of Governors of the Federal Reserve System




-19-

Selected Canadian Money Market and Related Data
3-mo. Treas. bills
Canada
, , Spread
jy
U.SJy
over U.S.

Spot
c/

Net incentive to
hold Can.
billg/

Canadian dollar
3-mo.
discount T-I
forward premium (+)5y

1959 - High
Low
1960 - High
Low

6.16
3.25
5.1U
1.68

U.U9
2.80
U.63
2.10

2.96
0.30
1.62
-0.82

105.$1
102.58
105.27
100.33

—
—
—
—

—
—
0.99
-0.91

—
__
1.99
-0.57

Jan. 12
19
26
Feb. 2
9

3.18
3.22
3.OU
3.13
3.10

2.27
2.27
2.17
2.31
2.36

0.91
0.95
0.87
0.82
0.7b

100.63
100.66
101.05
100.88
101.16

100.56
100.53
100.95
100.81
101.09

-0.25
-0.50
-0.37
-0.25
-0.25

-0.66
0»U5
0.50
0.57
0.U9

a/ Average yield at weekly tender on Thursday.
15/ Composite market yield for the U.S. Treasury bill on Thursday close of business,
c/ In U.S. cents.
3 / Spread between spot rate and 3-month forward Canadian dollar on Thursday
closing, expressed as per cent per annum.
e/ Spread over U.S, Treasury bill (column 3), plus 3-month forward discount or
premium (column 6),
Selected Government of Canada Security Yield#
6-mo. Trees . bills
spread
Canada

a

1959 - High
Low
i960 - High
Low

6.21
5.11
5.33
1.99

Jan, 12
19
26
Feb. 2
9

3.U8
3.53
3.36
3.U8
3.U3

a/
b/
alii
o/
*/
9/
If
g/
H/

Long-term bonds

Intermediate
bonds (6 yr.)
spread
Canada

(26 tbmt!

x

a

1.37
-0.86

5.27
U.50
5.55
U.09

1.11
0.21

0.98
1,06
0.96
0.98
0.86

U068
U.73
U.72
U.68
1.68

0.82
0.78
O08U
0.82
0.89

.

spread

:

a

135 yearj

X£k
spread

5.30
U.UU
5-U2
U.63

1.36
0.85

5.05
U.73
5.28
U.68

1,61
0.95

5.17
5.20
5.18
, 5.18
5.15

I.29
1.29
1.29
1.29
1.32

5.20
5.20
5.18
5.19
5.19

1.50
1.U7
1.U8
1.50
1.55 .

Average yield at weekly tender on Thursday,
Spread between Canadian auction rate and pom
composite market yield of U.S.
on close of business Thursday.
Thursday#
Government of Canada 2 - 3 A per cent of June 1967-68.
Spread over U.S. Government 2-1/2 per cent of 1963-68.
Government of Canada 3-l/U per cent of October 1979,
Spread over U.S. Government 3-l/U per cent of 1979-83.
Government of Canada 3 - 3 A per cent of September 1996 - March 1998.
Spread over U.S. Government of 1995.




-20-

Canada: Changes in Distribution of Holdings of Canadian
Government Direct and Guaranteed Securities
(Billions of Canadian dollars, par value)
Bank of Canada
Treas.
Bonds
bills
Dec. 8
15
22
29
Jan. 5
12
19
26
Feb. 2
9

Source*

+
+
+

9
2
5
3
2
9
1U
20
18
5

+
-

Government
Total
- U
- 6
-103
+ 2
- 11
+ 16
+ 25
- IS
- 61
- 6

3
1
9
0
2
12
22
1
U6
H

Chartered banks
Tf8&8»
Bonds
bills
+
+
+
+
+
+
+
+

7
13
18
6
18
39
10
aa
2U
33

+
+
+

28
5
23
ia
12
2
17
6
51
8

General public
Savings Treas.
bonds
bills
Bonds
+
-

h
13
11
8
a
16
7
7
3
3

+ 1
+ 19
- 11
+
-

15
2U
3
10
8
31

+
+
+
+
+
+
-

31
a
62
2a
10
11
17
7
56
6

Bank of Canada, Weekly Financial Statistics#
Selected Canadian Financial Statistics
(in millions of Canadian dollars or per cent)
Jan. 19

Weekly
Jan. 26

13,6a6
aeo
13,166
97

13,628
as?
i3,iai
56

13,6a6
aeo
13,166
+
25

2/5,027 ^5,117 14,078
+
56
+
90
39

a,981
13

a,986
+
5

17,760 17,239
1,985 . 1,985
12,161
12,179
3,596
3A93
1,311
ia

17,750
1,985
12,163
3,603
352
1

i7,?a3
1,985
12,162
3,596

17,739
1,985
12,161
3,593

1,02a
8.1
2,165
17.2

1,030
8.2
2,193
17.a

1,027
8.2
2,309
18.a

Nov.
1. Money supply:
Currency and deposits
Less: Govt, deposits
Equals: privately held
Change in period
2. General bank loans
Change in period
3. Total Govt, securities:
Of which: Treas. bills
Bonds
Savings bonds
a, New security issues^/
Of which sold in U.S.
5. Chartered bank liquidity:
Cash reserve
Cash ratio
Liquid assets
Liquid asset ratio
1/ Seasonally adjusted.
2*/ Source: A. E. Ames & Cc

13,768
628
i3,iao
- 2ai

17,99a
1,985
12,377
3,632
i,oaa
0
998
8.1
2,125
17.3




Ltd.

Monthly
Dec. .
13,811
5as
13,263
+ 123

1,017
8.2
2,093
16.8

Jan.

1,027
8.1
2,189
17.a

(Includes public and private securities.)

Feb. 2

February 13, 196l
-21-

Appendix 1
United Kingdom: Money and Capital Markets During January
Short- and long-term yields in London financial markets continued
to diverge markedly through January and early February. The London
Treasury bill rate eased further in January but the London bill continued
to exceed the yield on the New York bill by nearly 2 per cent or (with
exchange risk covered) by more than 1 per cent.
Long-term bond yields, on the other hand, continued to rise.
In early February, yields on (undated) Consols and War Loan were the highest
recorded since the summer of 1798 during the Napolitinic disturbances.
Since December 2, the following increases in yield have occurred (in
per c ent per annum):
Dec. 2

Feb. 3

Change

Treasury bills

U.63

U.17

-0. 1*6

6-year bond
l^-year bond

6.05
5.83

6.11
6.05

+0.06
+0.22

Consols (undated)
War Loan (undated)

5.52
5.80

5.81*
6.12

+0.32
+0.32

Long-term rates rose despite declining bill rates and widespread signs
of easing domestic demand, especially in consumer durable goods industries.
Three factors have contributed to this trend: the unfavorable trade
returns, bond sales by foreign investors who had expected the turn in short
rates to be repeated in the gilt-edged market and possible clearing bank
sales to bolster liquidity.
During December, new capital issues were sharply below December
19595 but the I960 total was 16 per cent more than a year earlier.
The first installment-credit relaxation since last April took
place in mid-January with,an extension of the maximum repayment period
for a wide range of goods. The authorities also announced that the Bank
of England would promote medium-term export credit by discounting 18-month •
paper.
After mid-January, the London gold price fell sharply back and
has since steadily declined. In early February, the price was below that
of mid-October just before the gold boom got underway.
Market market conditions. Money market rates eased further in
January. The yield on Treasury bills declined from U.3U per cent on
January 6 to U.17 per cent on January 27 (see Table). The yield on British
Treasury bills continues to exceed the U.S. Treasury bill yield by about
2 per cent.




The incentive to hold the London bill rather than the U.S.
bill (with exchange risk covered) remained just over one per cent
throughout the period (see Table and Chart).
Gilt-edged market. Yields on British Government securities continue
to rise with long-term yields at their highest levels for nearly 200 years.
On February 3 the yield on 2-1/2 per cent Consols (undated) was $.81|
per cent. This approaches the level of 3 per cent Consols which reached
an all-time high of 6.2$ per cent in July 1798, as may be seen in the
following price and yield figures:
Yield
3 per cent Consols
1798 (July)
1798 (October)

U8
$1

6,2$

2-1/2 per cent Consols
1921 (Low for year)
19$6 (Dec. 1)
19$7 (Sept. 20)
1961 (February 10)

U3-$/8
$0-1/1
U$
l|2-l$/l6

$.73
H.98

$.88

Yields on intermediate Government securities continued to rise through
January and early February but shorter-term issues were unchanged (see
Table).
A further tranche of £300 million of U-3/U per cent Conversion
Stock, 1963, was offered on February 3 at a price of 99-3/8 at a gross
redemption yield of just over $.00 per cent. Holders of the £800 million
of 2-1/2 per cent Funding Loan, 19$6-61, maturing on April 1$, have been
offered the opportunity to switch into an additional tranche of $-1/2 per
cent Exchequer Stock, 1966, on terms equivalent to a gross redemption
yield of $.6$ pe^ cent. The 1966 conversion offer is being made more
attractive by the decision to deal with this stock as a "short," which
will enable discount houses to participate. Some £$00 million of the 1966
bond is outstanding„
The Government of the Commonwealth of Australia issued two new
6 per cent bonds, each for £10 million and at a price of 97-1/2, to deal
with a maturing 3-l/U P e r cent bond 19$6-61. One 6 per cent is redeemable
in 197$, the other in 1981-83= The gross redemption yield for the 197$
is 6.26 per cent and for the 1981-83 6.20 per cent. The amount of the
3-l/U per cent stock falling due on June 1 is £20,$78,700. The 197$ stock
was a decided success but approximately 82 per cent of the I98I-83 tranche
was left with the underwriters.
New capital issues. New capital issues on the London market
•(excluding Treasury operations) during i960 were the second largest in
recent years? £$$6,7 million compared with £U80.3 million in 19$9. In
19$$ new capital issues amounted to £$67,2 million. The substantial increase
in new issues in i960 over 19$9 was concentrated between April, when bank
advances began to be curtailed, and November. In December i960 new issues




-23were 29 per cent below the figure for December 1959# Total new issues
were broken down as follows (in millions of pounds):
Borrowers

1956

1957

1958

1959

I960

United Kingdom
Public
Private
Commonwealth
Public
Private
Foreign (Private)

26U.6
53.9
210.7
.31.3
" 13.8
17.6'

321.0
27.1
293.9
60.9
13.0
U7.9
l.U

255.1
75.5
179.6
60.2
18.7
- 11.5
1.2

U35.1
50.2
381.9
35.3
13.6
21.7
0.2

5lUoU
57.3
U57.1
33.8
15.2
18.5
8.5

—

The sharp increase in new issues by private concerns resident in the United
Kingdom reflected borrowings by heavy industries and by property companies.
Installment credito The Board of Trade announced on January 19
a relaxation of controls over installment credit transactions; the maximum
repayment period of two years for a wide range of goods including cars,
radio and television sets, furniture and most domestic appliances, has
been lengthened to three years. Minimum initial deposits were unchanged.
Commercial bank loans. In the month to mid-January the London
clearing banks sold £17 million of gilt-qdged securities and reduced
other investments by £15 million. Loans rose by £31 million and gross
deposits fell by £99 million. With a sharp rise in the liquidity ratio
from 31*9 in the month to mid-December to 33*1 per cent in mid-January,
the banks' recent liquidity pressures were materially eased. To aid
exports, the Bank of England announced that medium-term export credits
within eighteen months of maturity may be considered by the banks as
liquid assets and would be discountable at the Bank.
Trade balance. The seasonally adjusted trade gap in December
remained at about the monthly average for I960. Exports (including reexports) declined from their high for the year of £Ultl million in November
to £387 million in December, while imports declined from £3Ul million in
November to £3lU million in December. The monthly average trade deficit
for i960 was £76 million compared with a monthly average of £U3 million
in 1958 and 1959.
Bullion market. After rising in early January to $35.80 per
fine ounce, the price of gold in the London market dropped sharply after
the ban, announced on January lit, on U.S. residents holding gold abroad.
Statements by the new United States administration concerning futurepolicies on gold and the domestic economy have further depressed the price.
By February 10 the price of gold had declined to 35*16 per fine ounce, the
lowest point since the mid-October boom.




Sterling
fixing price
January 6
13
20
27
February 3
10

25V3

Spot
sterling

Dollar
fixing price

Trading range

2 Sit/10
252/8
252/5

280.68
280.73
280.73
280.65

35.1203

35.680
35.730
35.150
35.100

251/9
251/-

280.39
280.17

35.29UO
35.1613

35.150 - 35.165

35.681k
35.7696
35.1655

-

35.68k
35.770
35.550
35.550

35.210 - 35.300

Foreign exchange* Spot sterling declined steadily from earlyJanuary and fell sharply in early February to its lowest point since
June 17. It declined from 280.73 U.S. cents on January 13 to 2.8065 U.S.
cents on January 27. By February 3 the spot rate had dropped to 280.20
U.S. cents (see Table).
The
disdount
on
3-month forward
sterling
remained
steady
in
most
of
January
at
just over 280.00 U.S. cents but fell sharply in early February to 279.65
U.S. cents (see Table). After declining to 277.75 U.S. cents early in
January security sterling strengthened to 280.625 U.S. cents by February 3.
Britain's gold and foreign currency reserves rose in January
by £5 million to £1,159 million. Adjusted for a £lt million European
Payments Union bilateral debt payment, the United Kingdom had a surplus
of £9 million compared with a decline of £22 million in December (with
the £121 million Ford transaction excluded).
Stock market. Stock prices have generally increased slightly
through January and early February with the Financial Times index of
share prices rising from 310.6 on January 6 to 315*0 by February 3 (see
Table). With rising bond yields, Consold now yield 1.19 per cent more
than industrial shares and War Loan 1.U7 per cent more on February 3 (see
Table).

British Commonwealth Section
Division of International Finance
Board of Governors of the Federal Reserve System




United Kingdoms

Date

-25-

Treasury Bill Yields and Exchange Rates

3-aoo Treasury bill
Discount
.
, Differon 3-mo.
U.K.*/ U.S..5/
ence
sterlings/

Net
incentive
to hold ,
U.K. billS/

Exchange rate
Spot
Discount
sterling
on 3-mo.
«/
sterling*/

1959 •- High
Low
1960 - High
Low

3«6
3*0
5.68
2.13

U«7
2.6
U.59
2.05

-1*1
0 eli
. 3.63
-0.81*

—
——
(P).6U
2.33

—
——
1.95
- .23

—
—
281.58
279.83

—
—
1.6U
(P).U7

Dec. 9
16
23
30
Jan. 6
13
20
27
Feb. 3

U.U8
U.38
U.35
1.35
U.3U
li.30
U.18
U.17
U.17

2.26
2.2U
2.18
2.20
2.28
2.27
2.22
2.18
2.28

2.22
2.1U
2.17
2.15
2.06
2.03
1.96
1.99
1.89

0.97
1.01
0.96
0.90
1.03
0.97
0.91
0.86
0.79

1.05
1.13
1.21
1.25
1.03
1.06
1.05
1.13
„ 1.10

280.86
280.7U
280.57
280.3k
280.72
280.73
280.73
280.65
280.20

0.68
0.71
0.67
O.63
0.72
0.68
0.6U
0.60
0.55

a/
%f
c/
d/
e/
f/

Average-yield at Friday weekly tender.
Closing market yield for Friday in New York.
Spread between spot and forward rate in per cent per annum.
Net of difference in bill yield less discount on 3-Month sterling.
Spot rate in New York market in U.S. cents,
Spread between spot and forward rates in U.S. cents.

United Kingdoms

Selected Capital Market Yields

bondjy

War
loan®/

i960 - High
Low

6.11
U.93

6.00
5.33

5.9U
5,53

5.70
5.03

U.96
3.7U

1.U9
0.63

338.6
29U.6

Dec. 9
16
23
30
Jan. 6
13
20
27
Feb, 3

6.05
6.08
6.08
6.11
6.11
6.10
6.10
6.12
6.11

5.86
5.88
5.90
5.91
5.97
6.06
6.07
6.08
6.05

5.88
5.90
5.93
5.9U
5.95
6.01
6.02
6.08
6.12

5.59
5.66
-^5.68
5.70
5.70
5.7U
5.75 '
5.80
5.8U

U.96
U.90
U.82
U.82
U.73
U.73
U.67
U.71
U.65

0.63
0.76
0.86
0.88
0.97
1.01
1.08
1.09
1.19

29U.6
299.6
; 305.3
30U.7
310.6
308.5
31U.2
312.7
315.0

a/
E/
c/
d/
e/
t/
•g/

Cona^ls

Share
yieldS/

6-year
bond®/

Yield

5-1/2 per cent Exchequer, 1966.
3 per cent Savings Bond 1965-75°
3-1/2 per cent War Loan (undated).
2-1/2 per cent Consol (undated)
Financial Times.
Difference between yield on 2-1/2 per cent Consols and share yield,
Financial Times.




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