Full text of H.16 Capital Market Developments : February 15, 1960

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Not for Publication

DECONTROLLED AFTER SIX MONTHS

H.lU

February 15> I960
CAPITAL_MARKET DEVELOPMENTS
UTTiffi^UNITED STATES AND CANADA
Part I - United States

During the week ending February 12, one large corporate issue
for $25 million and State and local government issues (including a $103
million Public Housing Authority offering) totaling $113 million were
sold. A $125 million issue of the International Bank for Reconstruction
and Development and a $30 million Canadian issue were also offered.
This week, the volume of corporate security offerings for new
capital is expected to be much larger than in recent weeks. Corporations
are expected to offer $162 million of securities. The calendar also
includes large State and local government issues totaling $60 million.•
Bond yields - Yields continued to decline last week for all
categories of outstanding bonds except those for lower grade corporate
bonds which remained stable.
Housing starts - Private nonfarm housing starts in January
declined more than usual, and at a seasonally adjusted annual rate of
1,210,000 units were at the October-November level, well below the
December rate (revised upward) of 1,330,000 units. At 21.5 per cent
of the total, FHA-insured starts accounted for the smallest share of
the total in eleven months.
Stock prices - Stock prices, as measured t>y Standard and Pocr «s
index of 500 common stocks declined on balance last week, closing at
55.1*6 on February 12. Trading activity declined slightly with the daily
volume averaging 2.7 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 at the end of this report.

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




HIGH-GRADE

BOND

YIELDS

f

LOWER-GRADE

BOND

YIELDS




M U.S.

GOVERNMENT

Exhibit B - Tables for Exhibit A
High-grade Bond Yields
Corporate
Aaa 1/

U. S. Govt,
long-term 2/

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

State and
local govt.
Aaa y

(Per cent)
2.85 (it/23)
it.lit (9/27)
3.55 (5/2)
It. 61 (12/31)
U.09 (1/9)
1.61 (1/29)
1.57 (2/12)

2.15 (8/6)
3.76 (10/18)
3.07 (it/25)
it. 37 (12/31)
3.83 (1/2)
it.it2 (1/8)
it. 20 (2/12)

1.90 (9/2)
3.it5 (8/29)
2.6k (5/1)
3.65 (9/2it)
3.06 (3/26)
3.53 (1/7)
3.38 (2/11)

.30
.60
.22
.50
-16
.37
.19

.30
•hi
.3k
.92
.53
.89
.82

It. 61
It. 61
2t.6l
it.6o
it. 57

it. 36
it. 29
it. 20

i:8

3.19
3.U7
3. tor
3.it3
3.38

.2it
.26
.25
.31
.37

.88
.88
.89
.86
.82

Lower-grade Bond Yields
Date

Corporate
Baa 1/

State and
local govt.
Baa]/

Spread between
Aaa and Baa
State and
. Corporate
local govt.

(Per cent)
195it 1957 1958 1959 -

Low
High
Low
High
Low
I960 - High
Low

3. a (12/31)
5.10 (11/29)
lt.5l (7/11)
5.32 (12/31)
it.83 (it/17)
5.36 (2/12)
5.32 (1/8)

2.93 (8/5)
it. 51 (8/29)
3.6U (5/1)
it.it6 (7/2)
3.92 (3/26)
k.le (i/7)
it. 35 (2/11)

Jan.
Jan.
Jan.
Feb.
Feb.

5.3it
5.35
5.36
5.36
5.36

it.it3
it.itl
it.itl
it.itO
it. 35

15
22
29
5
12 e /

.52
1.27
.77
.77
.56
.79
.71
.73
.7it
.75
.76
.79

.96
1.21
.93
.98 ,
.79
.97
.93
.9U
,9it
.9it
.97
.97

g/ Preliminary.
1/ Weekly average of dally figures. Average term of bonds Included Is 25-26 years.
2/ Weekly average of dully figures. The series Includes bonds due or callable In 10 years or more.
3/ Thursday figures. Only general obligation bonds are Included; average term Is 20 years.
Note.--Highs and lows are for Individual series and may be on different dates for different series.




STOCK

MARKET

PRIVATE

PERMANENT




NONFARM

DWELLING

UNITS

STARTED

120'

-5-

Exhibit D - Tables for ExtebiL C
Stock Market
Stock price
index 1/

1957-1959 - High
Low
i960 - High
Low

60.51
39.78
59.50
55.U6

December
January
Jan. 29
Feb. 5
Feb. 12 2/

59.06
58.03
55.61
55.98
55.h6

Common
stock
yields 2/
(per cent)

(7/31/59)
(12/27/57)
(1/8)
(2/12)

Stock market customer credit
Trading
Bank
Customers'
volume 2/
Total debit bal- loans to
(millions
ances U/ "others" 5/
of shares)
(Millions of dollars)

sn.a.
s

3,li01
2,482

3.18
3.1a

li.3
l.U
3.6
2.7

1,373
1,060
n.a.
n.a.

3.18

3.3

3.1a
3.38
3.14

2.7

It,to
n.a.
n.a.
n.a.
n.a.

3,280
n.a.
n.a.
n.a.
n.a.

1,17 k
1,167
1,167
1,155
n.a.

3.07

1^.66

3.28

n.a.

1:1
2.8

l/*s»uI2r*V«i*Poop*« -Pipoiiti'indix'of 500. ««•«>rtooto,«««Kly oiortns Prl"«.

d

*u

federal Reserve, Yields shown are for dates on which price index reached its high or low.

Private Permanent Nonfarm Dwelling Units Started 1/

Date

1959 - Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
. Nov.
Dec.
1960 - Jan.

Unadjusted
Total
Seasonally
Conv,
VA
EHA
Unadjusted
adjusted
annual rate
(Thousands of units)
l,36ii
1,U03

a1,370
s

1,368
1,375
1,31*0
1,323
1,180
1,210
2/1,330
E/1,210

8U
9h
118
137
13 U
131
127
125
117
102
91

20
20
30
3h
3k
35
31
31
30
27
20
20
16

7
6
10
11
10
11
11
10
10.
9
8
6
n.a.

57
67
78
93
89
85
85
81
77
66
. 63
E/56
n.a,

see**




fh

- 6 -

Exhibit E

H.lU

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

I960
January
February
March

1

New capital
Corporate 1/
State and local 2/
I960
1959
1
1958
1
1958
1
1959
840
745
631

728
857v
1,553^

April
May
June

899
791
874

i,i4o
597
887

July
August
September

531
718
709

1,107
540
1,114

e/700
e/600

October
November
"December
1st
2nd
3rd
4th

887
865
936 :

quarter
quarter
quarter
quarter

1st half
Three quarters
Year

862
518
920

2,216
2,564
1,958
2,688

3,139
2,623
2,760
2,300

4,780
6,738
9,427

5,762
8,522
10,823

e/700
e/550

638
857
645

812
953
511

931
592
i/l,005

798
895
551

56?'
5l4
468

S

806
403
651
456
474
435

2,139<
r/2,528
1,549
e/1,537

2,276
2,244
1,860
1,365

i/4,667
r/6,26l
e/7,753

4,520
6,380
7,746

Excluding finance companies 4/
1st
2nd
3rd
4th

quarter
quarter
quarter
quarter

Year

2,011
2,409
1,695
e/2,538

2,899
2,586
2,731
2,213

e/8,654

10,429

-

e/ Estimated.
__
1/ Securities and Exchange Commission estimates of net proceeds.
2/ Investment Bankers Association of America estimates of principal amounts.
3/ Includes $718.3 million AT&T convertible debenture issue.
u/ Total nev capital issues excluding offerings of sales and consumer finance
companies.




-7H.14

Extdbit F
Other Security Offerings 1/
(In millions of dollars)
Long-tern
Foreign government 2/
Federal agency 3/
I960
1959
1
195b
I960
I
1959
1

January
February
March

77
S>9
2

196
53

April
May

56
50
42

139
198
120

July
August
September

85
1
36

9
5
17

October
November
December

33
42
70

58
123
74

86

992

. 707

Year

#8

175

—

523
—

164

.

98
150

190
1*28
295

233
U60
273

April
May
June

563
Ml
215

July
August
Septemb er
October
November
December
Year

—

220

Short-term
State and local government h/
January '
February
March

1958
1,163
251

199

—

2,321

Federal agency 3/
359
500
489

371
208
144

357
354
264

486
675
289

209
161
329

246
467
399

289
423
369

727
365
665

437
206
330

235
343
306

231
415
243

733
471
288

454
114
137

1,127

3,910

6,047

479

-

1

3,098

EZ Prellmlnaiy.
1/ Data presented in this exhibit differ from those in Exhibit E in that refunding Issues, ao well as new
capital Issues, are included. Long-term securities are defined as those maturity in more than one year.
2/ Includes securities offored in the United States by foreign governments and their subdivisions and by
international organizations. Source: Securities and Exchange Commission.
3/ Issues not guaranteed by the D. S. Government. 'Source i long-term, Securities and Exchange Commission*
short-term, Federal Reserve.
4/ Principally tax and bond anticipation notes, warrants or certificates and Public Housing Authority
notes. In seme instances PHA notes included may have a somewhat longer term than one year. Sourcei Bond Buyer.




H.Ik

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

Month

Corporate

1959 - January
February
March
April
May
June
July
August
September
October
November
December
I960 - January

State and
local government

369
3h0
215
359
31*2
28U
110
363
199
1*00
i|21
230
279

Other 2/

17li
35
176
20
50
60
50
98
175
20

335
551
369
563
258
635
19ii
263
21b
29k
163
217
388

70
100

Large individual Issues Offered February 1 through 12
Issuer

Type 3/

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

CORPORATE
Consolidated Nat. Gas Co.

Deb.

25.0

1985

5

lt.95

Aaa

STATE AND LOCAL GOVERNMENT
Milwaukee Co., Wise.
New York, New York
Wash.Sub.Sanit.Dist.,Md.
Public Housing Authorities

G.O.
G.O.
G.O.
G.O.

12.5^ 1961-80
22.0
1961-65
10.0 1961-90/75
102.8 1961-2000/76

3.19
3.35
3.77
3.82

2.65-3.25
2.85-3.35
3.00-L50
2.60-3.90

Aaa
A
Baa
Aaa

OTHER
Prov. of New Brunswick, Can.S.F. deb.
Montreal Metro. Corp.,Can. S.F. deb.
International Bank for
Reconstruction and
Development
Bds.




15.0
30.0.
125.0

1985
1985
1985

5

5.W
5.70

A
A

5.00

Aaa

-9H.lU

G-2
Footnotes

1/ Includes corporate and other security offerings of $15 million and over;
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.
3/ In the case of State and local government securities,. G. 0. denotes general
obligations; Rev.-Ut., revenue obligations secured only by income from public
utilities; Rev.-Q.Ut.,, revenue bonds secured bnly by revenue from quasi-utilities;
Rev.-S.T., revenue bonds secured by revenue from specific taxes only; Rev.-Rent.,
revenue bonds secured solely by lease* payments.
U/ $1.3 million of bonds of 1961 to 1970 not reoffered.




Exhibit H

li. lii

—10**

forthcoming Large Long-tern Public Security Offerings for New Capital
(Other than U. S. Treasury) 1/
Expected Proceeds from Forthcoming Large Issues
During month following
Subsequent to
date shown
date shown
State and
Other 2/ Corporate
Corporate
^ J o t h e r 2/
local govt.

Date of
computation
1959 - Jan. JO
Feb. 27
Mar. 31
Apr. 30
May 29
June 30
July 31
Aug. 31
Sept. 30
Oct. 30
Nov. 30
Dec. 31
1960 - Jan. 29

270
198
396
21*6
287
165
238
198
37U
385
226
210
207

551
292
12
21*7
ll*6

356
385
270
115
295
W5
210

k$
20
50
5o
25
70
^5

856
1*81
761
517
761
500
1*06
1*02
1*70
336
1*85
51*5
310

365
279
1*76
316
332
272
305
517
69U
509
271
280
252

1*5
20
50
50
25
70

Forthcoming Large Offerings, as of February 12
Issuer

Type

Amount
Approximate date
(millions
of offering
of dollars)

CORPORATE
Deb.
Pacific Telephone & Telegraph Co.
Com. stk.
^Tennessee Gas Transmission Co.
1st & ref. mtg. bds.
Duke Power Co.
S.F. deb.
. Duquesne Light Co.
Pfd. stk.
Brooklyn Union Gas Co.
1st mtg. bds.
Dayton Power & Light Co.
Coll. tr. bds
Imperial Investment Co., Ltd.
1st mtg. bds.
^Northern Indiana Public Service Co.
1st mtg. bds.
•^Louisiana Power & Light Co.
Deb., bds. & com.
Commerce Oil Refining Corp.
STATE AND LOCAL GOVERNMENT
Dallas,Texas
Port of New York Authority
St. Louis, Missouri
Los Angeles Co., California
Cuyahoga Co., Ohio
^Alabama Board of Education
Ventura Port Dist., Calif.
Elizabeth River Tunnel Comm., Va.
Grand Rapids Expressway, Mich.
Newark, New Jersey
State of California

 OTHER
None


G.O.
Rev.-Ut.
Rev.-Ut.
G.O.
G.O.
G.O.
Rev.-Q.Ut.
Rev.-Ut.
Rev.-Ut.
Rev.-S.T.
G.O.
G.O.

72.0
1*0.0
50.0
20.0
15.0
25.0
15.0
15.0
20.0
1*5.0

10.0
8.0
30.0
12.1*
18.3
10.5
20.0
10.0
22.0
18.0
15.0
100.0

Feb. 17
Feb. 17
Feb. 19
Feb. 25
Feb. 25
Feb. 26
Mar. 3
Mar. 16
Mar. 30
Indefinite
Feb. 15
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Mar.
Mar.
Mar.

16
17
23
25.
25
1
1
9

H-2

-11—

Footnotes
*—Included in table for first time.
1/ Includes corporate and other issues of $15> 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.




H.Ik
Yields on New and Outstanding
Electric Power Bonds, Rated Aa and J

Date

1952 - 1958
High
Low
1959

2.00 (9/1VS7)
2.93 (3/31/51*)

January
February
March
April
May
July 9
10
15
30
Aug. 5
.20

Sept. 18
Oct. 22
23
28

I960

Aa-rated offering yields
A-rated offering yields
Amount above
Amount above
Actual
Actual
seasoned yields
seasoned yields
(per cent)
(per cent)
(basis points)
(basis points)

29
30
Nov. 25
Dec. 8
9
10
Jan. 7

87
-3

L97
*1*.95

37
1*
10
17
37
29

1*.93

31

i i

11.85
L80
&
5.15

1*6
16
l*o

5.15

1*2
1*2

5^0

63

5.08

5.50 (11/7/57)
3.00 ( 3 / 1 7 M )

123
-15

*1*.75^

23

*1*.6?
5:%y
5.10

18
25
15
19

5.10
5.00

19
13

5.65

60

5.25
5.U0

35
50

5.1*5

51
50
28

5:3^/

*—Single observation, not an average.
1/ Covers only 30-year first mortgage bonds, as reported in Moody'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.
y includes one issue which provides for a 7-year period during which the
issue may not be called for refunding at a lower coupon rate.




February 15, I960

• ••13-

Part II - Canada
Despite the continuing declines in U.S. bill rates, short-term
Canadian yields were unchanged or upward during the past week. However,
there was a general easing in the yields on intermediate- and long-term bonds,
probably in part a reflection of the stronger tone in the U.S. bond market.
Average bond yields in the industrial, public utility and provincial
sectors of the Canadian market rose during the month of January.
Money market conditions. The tight cash positions of the
chartered banks, which produced a substantial decline in their bill
holdings, contributed to rising short-money rates in Canada. While the
yield on the short bill was unchanged (U.75 per cent at last Thursday's
auction compared with U.76 per cent a week earlier), the yield on the
six months bill rose from U.99 per cent to 5«05 per cent. The day-today loan rate closed on Wednesday at U.55 per cent or 1.20 per cent above
the close a week earlier. The major changes in Treasury bill holdings
during the week in millions of Canadian dollars were:
Chartered banks

-85

Bank of Canada
Government accounts
General public

15
18
52

The substantial increase in public holdings of bills reflected,
at least in part, the widening spread in favor of the Canadian bill
against the United States bill. The spread on the 3-month bill was 90
basis points and that on the 6-month bill 85 basis points (see Table).
The interest incentive in favor of the short Canadian bill against the
United States bill with the forward exchange risk covered widened to
almost 0.50 per cent per annum (see Table).
Bond market developmentsf There was a general easing in
Government of Canada bond yields, at least in part in response to rising
bond prices in United States markets. Despite this easing, the spread*
in favor of Canadian bonds were wider than they have been since last
fall. On Thursday, spreads between comparable Canadian and United States
securities were (figures in parenthesis refer to the preceding week):
0.90
0.85
0.81
1.12
1.33

per
per
per
per
per




cent
cent
cent
cent
cent

on
on
on
on
on

a 91-day bill (0.81)
a 182-day bill (0.56)
an 8-year bond (0.71)
a 20-year bond (1.06)
a 35-year bond (1.22)

-lllDuring January, yields in other sectors of the capital market
rose. On an average of UO bonds, the average market yield rose from 6.23
per cent at the end of December to 6.30 per cent on February 1 (see Ta^le).
Yields in the public utilities sector rose by 13 basis points, those in,
the industrial by 8 basis points and those in the provincial by 7 basis
pointsj the average yield of 10 municipal issues was unchanged.
Two Canadian placements in United States markets were reported
last weak. Montreal Metropolitan Corporation made its first sale in
this country5 it was a (U.S.) $30 million, 25-year sinking fund debenture
with a 5-5/8 per cent coupon, priced to the public to yield 5.70 per cent
and costing the borrower about 6.U0 per cent. The Simpson-Sears Acceptance
Company placed privately (U.S.) $5 million in a 5-7/8 per cent, 20-year
secured debenture; for comparison, the same borrower obtained $20 million
for the same maturity in Canada early in January with a 6-3/U per cent
coupon.
Stock markets. Canadian stock prices resumed their declines
last week. The Toronto industrial index on Friday closed at 50U.38
compared with 510.90 a week ago, 52U.21 a month ago and 532.19 a year ago.
The Montreal industrial index closed at 299*7 compared with 303.9 a week
ago, 313.8 a month ago and 311*5 a year ago. During the past five weeks,
the decline in Canadian industrial shares has been about half the comparable
decline in industrials in New York. Two factors contributing to the more
limited price declines in Canada seem to be: (a) many key Canadian stocks
compare relatively favorably with earnings; and (b) there appears to be
much less United States and European participation in Canadian markets
than in 1956-57 and in 1958. Recent price declines in Canada have not
been marked by heavy selling pressures but a continued reluctance to buy
has been reported.
—

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




-15Selected Government of Canada Security Yields
3-month

Intermediate
a

Date

Longterm
Govt, >
bond2/

Spread between
Canadian & U.S. rates
long-term
3-mo*.
bonctiZ
bills?/

1957 - High
1958 - High •
Low
1959 - High
Low •

U.08
3.65
0.87
6.16
3.25

U.81
U.52
3.31
5.30
U.U5

U.35
U.U2
3.78
5.30
U.U1

1.19
. 0.U7

2.96
0.30

Jan. 21
28
Feb. U
11

U.66
U.60
U.76
U.75

5.U3
• 5.U5
5.36
5.Uo

5.U1
5.U1
5.38
5.35

0.97
0.99
1.06
1.12

0.39
0.68
0.81
0.90

f

Discount
on 3-mo.
Canadian
dollarS/

0.2U
0.U2
o.5U
0.U2

Average yield at weekly tender on Thursday.
Government of Canada 2-3A per cent of June 15, 1967-68,
Government of Canada 3-l/U per cent of 1979•
U/ U.S. Government 3-l/U per cent of 1978-83. Government of Canada 3-lA per
cent of 1979.
5/ Spread between Canadian auction rate and composite market yield for the
U.S. bill on the close of business on Thursday.
6/ Spread between 3-wonths forward and spot price of the Canadian dollar,
expressed as per cent per annum, on Thursday.
Averages of Selected Bond Yields

Date

10
Proving
cialai/

10
Munici7
pals!/

10
Public .
Utilities!/

10
Indus-,
trials!/

Govt, of
Canada .
long-termi/

195U-55 - Low
1957 - High
1958 - High
Low
1959 - High
Low

3.27
5.18
5.08
U.U6
6.19
5.1U

3.65
5.77
5.30
5.02
6.60
5.38

3.69
5.50
5.03
U.81
6.01
5.1U

3.93
5.77
5.12
U.78
6.05
5.22

3.18
U.29
U.78
3.88
5.61
U.70

Nov.
Dec.
Dec.
Feb.

6.06
5.97
6.12
6.19

6.53
6.52
6.60
6.60

6.00
6.00
6.0U
6.17

6.03
6.02
6.1U
6.22

i5.60
s

2
1
31
1

5.73

1/ Average term of bonds included is 1U-16 years. Source: McLeod, Youngs
Weir and Co., Ltd.
2/ Government of Canada 3-3A per cent of January 15, 1975-78.