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Mot for L o c a t i o n

m

m

s n

MOUTHS
January 23, 1961.

i
i

CAPITAL MARKET DEVELOPMENTS
IN THE UNITED STATES AND CANADA
Part I - United States

Corporations sold large issues "with total proceeds of $lt5 million
and State and local governments sold bonds aggregating $138 million during
the week ending January 20. This week, corporate issues, including the
expiration of subscription rights, are expected to total #102 million.
Large State and local government bond issues amounting to $97 million are
also scheduled for sale.
Long-term bond yields - Yields increased last week for all
categories of outstanding bonds, except those for high-grade corporate
bonds which declined slightly.
Yields on new corporate bond issues also declined slightly. A
new Aa-rated, first mortgage electric utility bond issue was offered to
Investors to yield
per cent, 5 basis points lower than the yield for
a comparable offering made a week earlier.
Short- and intermediate-tern interest rates - Yields on Treasury
bills declined last week, but those on three- to five-year Government
obligations increased. Other major abort-tezm money rates were unchanged.
Housing starts - Housing starts in December declined substantially
more than usual for the month to a seasonally adjusted annual rate of
990,000. This was 18 per cent below the November rate and about 21 per cent
below the average rate of the first 11 months. Most of the drop was in
conventionally financed starts. Especially bad weather in the New England
and Middle Atlantic States may have been responsible for some of the decline.
Stock market credit - Total customer credit in the stock market,
excluding borrowing on U. S. Government securities, increased £112 million
in December. Totaling $U.U billion at the end of the month, customer credit
was at the highest level in i960 and only 1 per cent less than at the end
of 1959. The December increase reflected an $81 million rise in net debit
balances and a $31 million rise in bank loans to others than brokers and
dealers.
Borrowing by member firms of the New York Stock Exchange maintaining margin accounts changed little in December, while customers' net free
credit balances increased $73 million. These and other data for stock market
credit in November and December are shown in the table on the following page.




/
-3-

End of month
Dec.
I Nov.
Customer credit
Excluding U. S. Government securities - total
Net debit balances
Bank loans to 11 others11
Net debit balances secured by U. S. Govt, securities
Bank loans to "others" for purchasing or carrying U. S.
Government securities
Broker and dealer credit
Money borrowed except on U. S. Government securities
On customer collateral
Money borrowed on U. S. Government securities
Customers' net free credit balances

Change

(Millions of dollars)
k,ko6
3,222
• 1,181*
95

k,29k
3,110.
1,153
99

+112
+81
+31

-k

13k

128

+6

2,133
1,806
1U2
1,135

2,129
1,815
139
1,062

-9
+3
+73

*h

Stock prices - Stock prices continued to increase last week;
Standard and Poor's index of 500 common stocks closed at 59.96 on January 20,
.36 points higher than a week earlier. Trading activity, although somewhat
less than the very heavy volume a week earlier, averaged h.l million shares
a day.
More detailed information concerning recent capital market
developments is presented in the attached exhibits.
Developments in the Canadian capital markets 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.




H

L O N G - T E R M B O N D YIELDS

i HIGH-GRADE

R

T

/vf

U . S . GOVERNMENT

T




rJ\

(

STATE

I.l
lll

Exhibit B - Tables for Exhibit A
Long-term Bond Yields ,
High-grade
Date

Corporate
Aaa 1/

U. S. Govt,
long-term 2/

-5-

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

State and
local govt.
Aaa y

(Per cent)
1951*
1957
1958
1959

-

Low
High
Low
High
Low
1960 - High
Low

2.85 <l|/23) .
U.llt (9/27)
3.55 (5/2) x
ll.6l (12/31)
U.09 (1/9)
U.61 (1/29)
I . 23 (9/9)
t

Dec.
Dec.
Jan.
Jan.
Jan.

i:S
k.3k'

23
30
6
13
20 2/

2.16

(8/6)
3.76 (10/18)

3.07
L37
3.83
k.h2
3.75

(1/25)
(12/31)
(1/2)

B (3/26)
E
3.06

(8/5)

3.53 (1/7)
2.99 (9/1)

.59
.19

3.12
3.11
3.13
3.14
3.16

.*
18
.53
.50
.*
13
.i
lO

.71*
.71
.71
.76
.76

(1/8)

Lowyr.
-grade

Date

vZ
Corporate
Baa 1/

.30
.60

.30
.17
.3U
.92
.53
.92
.53

3.86
3.82
3.84
3.90
3.92

lu33
k-32

1.90 (9/2)

State and
local govt.
Baa y

.22
.50

.

.16

- -

Spread between
Aaa and Baa
State and
Corporate
local govt.

(Per cent)
1951*
1957
1958
1959

-

Low
High
Low
High
Low
1960 - High
Low

3.to (12/31)
5.10 (13/29)
U.51 (7/11)

Dec.
Dec.
Jan.
Jan.
Jan.

5.09
5.09
5.08
5.10
5.11

23
30
6
13
20 e/

£S to1

5.36 (2/12)
L 9 8 (9/9)

2.93 (8/5)

tSE

.52
1.27
.77

3.92 (3/26)
U.I46 (1/7)
3.98 (12/22)

1

3.98
3.98
U.03

.75
.71*
.75
.77
.79

k.oh
k.09

.71

.96
1.21
.93
.98
.79
1.08
.86
.86
.87
.90
.90 .
.93

P / Prellalnary.
)J Meekly aversge ef dally figures. Averse tens of bqnds Included Is 26-26 years.
2/ Weekly average ef dally figures. The series lnoludss bends due or callable In 10 years er mere.
3/ Thursday figures. Only general obligation bonds are Included; average tem Is 80 years,
Hote.—Highs and lews are for Individual series and may be en different dates for different series.




STOCK

MARKET




Exhibit D - Tables for Exhibit C
Short- and Intermediate-term Interest Rates
/
Date

Discount
rate 1/

Government

/
3-month
bills 2/

Yields
6-month
bills 2/

3-5 year
issues 2/

Spread between yields on
3-month bills and yields on
6-mo. bills|3-5 yr. issues'"

(per cent)
195k
1957
1958
1959

-

Low
High
Low
High
Low
I960 - High
Low

1.50
3.50
1.75
il.00
2.50
Loo
3.00

.61
3.6U
•58
li.57
2.63
it. 59
2.11

Dec.
Dec.
Jan.
Jan.
Jan.

23
30:
6
13
20 £ /

3.00
3.00
3.00
3.00
3.00

(6/11)
(10/18)
(5/29)
(12/2U)
(2/20)
(1/8)
(10/28)

2.21*
2.18
2.28
2.28
2.25

—
3.02
L.91
2.92
5.07
2.38

(12/26)
(12/31)
(1/2)
(1/8)
(12/30)

2.1*2
2.38
2.1*8
2.51
2.16

1.66
U.0I4
2.1l*
5.00
3.70
U.97
3.1*0

(ii/30)
(10/18)
(6/6)
(12/21*)
(1/2)
(1/8)
(12/30)

3.16
3.10
3.39
3.52
3.59

.26
.79
.19
.58
.16

•66
.86
.i
Ol
1.1*2
.1*0
' 1.81
.38

.18
.20
.20
.23
.21

1.22
1.22
1.11
1.21*
1.3U

Private

Date

Stock Exchange
call loan 1/

Spread between 3-month
Prime
Finance company Treasury bill yield and
rate 1/
finance company
paper 3/
paper rates
(per cent)

1951*
1957
1958
1959

-

Low
High
Low
High
Low
i960 - High
Low

3.00
l*.5o
3.50
5.00
Loo
5.50
l*.5o

3.00
l*.5o
3.50
5.oo
Loo
5.oo
1*.50

1.25 (12/31)
3.88 (11/15)
1.13 ( 8 / 8 )
i . 88 (12/31)
*
3.00 ( 3 / 6 )
5.13 ( 1 / 2 2 )
2.88 (11/1*)

Dec.
Dec.
Jan.
Jan.
Jan.

23
30
6
13
20 2/

U. 5o
l*.5o
l*.5o
l*.5o
l*.5o

L5o
L5o
L5o
l*.5o
L50

2.91
2.88
2.83
2.81
2.81

..

0 (12/18)
.59(7/19)
-35(8/#)
.06 (10/9)
.13 (12/1*)
1.02(3/25)
.22 (1*/15)

.

.67
.70
.55
.53
.56

1/ Weekly rate shown 1» that In affeet at end of purled. Discount rate Is. for Federal Reserve Bank of New York.
Stock exchange call loan rate te going rate on oall loans secured ty oustoners' stock exchange ooll&teral at
New York City banks. Prime rate Is that ohurgod by large b*nks on short-term loans to business borrowers of
the highest credit standing.
2/ Market yield; weekly avenges oompirted from dally cloning bll prices. Series of 3-5 year Issues nondstu of
selected notes and boivli.
3/ Average of dally rates i u . l h d by flm.-tue ooapanlee for directly placed paper for vnrylny maturities In the
illae
#0-179 d t ruivt«.
iy
( ,
Note,~H)xhe and lows ure for Individual series.«,nd nay be on different da.tee for < f ferent varies. Per spread*,
K
high refers to widest, and low to nnrronest.'




SHORT-

AND

INTERMEDIATE-

TERM

INTEREST

RATES

GOVERNMENT

(PRIVATE




MIL

LOANS

Exhibit F - Tables for Exhibit E
Stock Market

Stock price
index 1 /

Date

1957-59

- High
Low
i960 - High
Low

60.51
39.78
59.50
53.32

November
December
Jan. 6
Jan. 1 3
Jan. 20 ft/

(7/31/59)
(12/27/57)
(1/8) .
(10/21)

5 5 . hi
56.83
58.48
59.60
59.96

Trading
Common
stock
volume 2 /
yields 2 /
(millions
(per cent) of shares)

Stock market customer credit
Customers•
Bank
Total debit bal- loans to
ances 4 /
"others" 5 /
(Mi]
Llions of dollars)

3.07
4.66
3.18
3.62

4.3
1.4
4.1
2.2

4,764
3,554
4,406
4,132

3,401
2,482
3,222
3,004

1,373
1,060
1,184
1,111

3.51
3.41
3.32
3.26
3.24

3.1
3.7
3.6
4.4
4.1

4,294
4,406

3,141
3,222
n.a.
n.a.
n.a.

1,153
1,184
1,189
1,168
n.a.

n.a.
n.a.

n.a.—Not available.
g/ Preliminary.
Standard and Poor's composite Index of 500 common stocks, weekly closing prices, 1941-43=10, Monthly data
are averages of daily figures rather than of Fridays' only. Highs and lows are for Fridays' data only.
2/ Standard and Poor's composite stock yield based on Wednesday data converted to weekly closing prloes by
Federal Reserve, Yields shown are for dates on which price index reached its high or low.
Averages of daily trading volume on the New York Stock Exchange,
Bid of month figures for member firms of the New York Stock Bcchange which carry margin aooounts) excludes
balances secured by U. S. Government obligations,
5/ Wednesday figures for weekly reporting member banks. Bcoludes loans for purchasing or carrying U, S, Government securities. Prior to July 1, 1059, such loans are excluded only at banks in New York and Chicago. Weekly
reporting basks account for about 70 per cent of loans to others. For further detail see Bulletin,

y

%

Private Housing- Starts 1 /

Date

Unadjusted
Seasonally adjusted
Conventional
Total
annual rate
Nonfarm
I Total
VA
Nonfarm
Total
Nonfarm
Total
old series new series
old series new series old series new series
(Thousand of units)

20
57
96
83
Dec.
l,U5l
1,330
16
87
1,216
55
1,366
75
Jan.
88
18
65
52
1,115
1,367
74
Feb.
68
22
63
90
1,112
1,125
Mar.
95
76
•91
124
25
109
1/325
Apr.
1,135
127
25
95
May
1,342
88
26
122
1,302
June
80
111
24
1,182
July
26
125
90
Aug.
68
22
1,066
97
Sept.
81
109
23
1,256
Oct.
68
20
1,212
E/ Nov.
8990
*48
14
£/ Deo.
1/ Total dtarts are Census estimates, which are not strictly comparable with old nonfarm series developed by BLS. A
dwelling unit is started when excavation begins; all units in an apartment structure are considered started at that
time. FHA and VA starts are units started under commitments by these agencies to insure or guarantee the mortgages.
As reported by FHA. and VA, a unit is started vhen a field office receives the first compliance Inspection report, .
which is made before footings are poured in some cases but normally after the foundations have been completed.
Capehart military housing units are excluded. Conventional starts are derived as a residual, although total and
R M and VA starts are not strictly comparable In concept or timing; they Include both units financed by conventional
mortgages and units without mortgages.

' 1959
i960




%

10-

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

1961
January
February
March

577
715
86o

821
738
6U6

766
567
1,03k

e/500

October
November
December

639
858
646
I.

89I1
785
887

731
550
1,033

932
593
1,006

535
74
IO
703

572
602
6#

567
516

E/965

July
August
September

739
623
582

727
962
738

April
May
June

1st
2nd
3rd
iith

New capital
Corporate 1/
State and local 2/
| I960
1961
| I960
1 1959
1 1959

879
86U
900

336
J/48
D16
e/500

597
519
Ii55

2,20k
2,567
1,979
2,61*2

1,91*3
2,311
1,863
e/l,3Ck

2,113
2,531
1,5U8
1,571

.1,257
6,200
e/7,k2h

6,222
7,793

2/927

e/850

quarter
quarter
quarter
quarter

e/2,7h2

1st halfThree q a t e i - ;
urf'fs
Year

1|,519
6,915
a/9,687

2,151
2,367
2,k27

h,m
6,750
9,392

e/750

.

h&5

h,6ih

Excluding finance companies 3/
1st
2nd
3rd
Uth

quarter
quarter
quarter
quarter

Year

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

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

e/8,231

8,630

|7 Estimated.
Preliminary.
1/ Securities and Exchange Commission estimates of net proceeds.
2/ Investment Bahkfcrs Association of America estimates of principal amounts.
3/ Total new capital issues excluding offerings of sales and consumer finance
companies.




h.lh

Exhibit H

-11-

Other Security Offerings 1/
(In millions of dollars)
Long-•term
Foreign government 2/
Federal arency 3/
I960
I960
1958
1
1959. 1
I1
1959
JanuaryFebruary
March

01
60
2

196
53

3U
72
lO
i

• 58
50
1*2

139
198
120

July
August
September

25
1
36

85
1
35,

October
November
December

3k

33
30
70

58
123

547

99 2

April
May
June

2
175
70

2

Year

—

9
5
17

7h

182
150
150

199

1958
1,163
251

175

—

. 523

1U8
351
—

.

—

16U
199
—

160
149
fi/181
2/1,673

Short*-tferm
State and local government h/

98
150

—

220
—

8 6

707

.

2,321

Federal agency 3/

January
February
March

268
315
365

190
1*28
295

233
1*60
273

479
1*75
511

, 359
500
I4O9

371
208
1W,

April
May

365
351
297

563
111
2L5

357
3%
26J*

509
632
1*35

Ltt 6
675
289

209
161
329

July
August
September

280
505
199

21*6
1*67
399

289
li23
369

312

727
365
665

. 137
206
330

25k
2/J4I8

235
3k3
358

?31

21a

2li3

177.

733
1*71
288

ill*
137

6,0/i7

3,096

October
November
December
Year

1,179

11
*5
3,910

16
*8

296

282

c
/It,817

1I5U

£/ Preliminary.
1/ Data presented in this exhibit differ from those in Exhibit B in ttat refunding 1 stuns, an will as new
capital lesues, ere Included. Long-term mourlties are defined as those m , u 5 n in " > a thar. one year.
atv.g
«r
2/ Inoludos securities offered in tho United States by foreign govorrmento and their ru'odtvieions end by
lnXernntlonnl organliatlona. "oureei Securities ami Bxohr.nge CCMmisitlor;.
3/ Issues not gunrent*ad by the U, S. G v r - s . - Sotirosi long-t»ro, Securities and Rcohange Coanlnslonj
otnir!.
short-term, Federal Reserve.
4/ Principally tax and bond anticipation not*s, warrants or certificates and Public Housing Authority
not»». In some instances PHA rites inolud-td may have a somewhat longer ton thin one year. Source: Pond Buyer.




\
-12-

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

Month

Corporate

1959 - December
i960 - January
February
March
April
May
July
August
September
October
November
December

State and
local government

230
279
2#
381
309
139
hh 2
303
581
266
566
465
260

,

217
#8
283
225
370
23k
561
191
298
367
U6
186
222

70
100
320
191
71
28
30
75
25
77
150
99

Large Individual Issues Offered January 1 through

Issuer

"type 3/

Amount I
(millions L t u r i t y
dollars)|

CORPORATE
15.0
Texas Eastern Trans. Corp. Pfd. stk.
Texas Eastern Trans. Corp. 1st mtg.p.l.bds.30.0
STATE AND LOCAL GOVERNMENT
G.O.
Fulton Co., Georgia
G.O.
Port of New Orleans, La.
Los Angeles Sch. Dists.,
G.O.
Calif 0 mia
G.O.
State of California
G.O.
State of Oregon
G.O. \
State of New York
G.O.
Montgomery Co., Md.
Contra Costa Co. Wtr. Dist.
Rev. -Ut.
California
Penna. St. Pub. Bldg. Auth. Rev.-Rent.
:
None

OTHER




Other 2/

20

Coupon
rate or Offiring
net inter- yield
est cost

1981

5

5.00

Hating

Baa

t

,J;

1U.5
17.0

1962-87
1966-96/76

3.28
3.77

1.50-3.45 Aa
2.140-3.90 A

>-

30.0
95.0
30.0
63.5
11.0

1961-85
1963-87/82
1976-78
1962-2011/01
1962-91

3.63
3.68
3.1*3
3.19
3.19

1.50-3.80
1.95-3.80
3.30-3.42
1.50-3.65
1.70-4.40

Aa
Aa
Aa

;

12.8
20.6

1963-96
1961-2000/70

3.98
3.85

2.10-4.20. Baa
1.50-4.00^V—

A

1-2

-13-

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.
J/ In the case of State and local government securities, G.O. denotes
general obligationsy Rev.-Ut., revenue obligations secured only by
income from public utilities; Rev0-Q.Ut., revenue bonds secured
only by revenue from qua si-utilities 5 Rev.-S.T., revenue bonds
secured by revenue from specific taxes only; Rev.-Rent., revenue
bonds secured solely by lease payments.
k/ 1 per cent securities of 1198-2000 not reoffered.




-ill-

Exhibit J
Forthcoming Large Long-term Public Security Offerings for New Capital
(Other than U. S. Treasury) 1/
Expected Proceeds from Forthcoming Large Issues

Date of
computation
1959 - Dec. 31
Jan. 29
I960
Feb. 29
. Mar. 31
Apr. 29
May 31
June 30
July 29
Aug. 31
Sept. 30
Oct. 31
Nov. 30
Dec. 30

During month following
date shown
State and
Corporate
Other 2/
local govt.
210 '
207
301
299
202
483
237
596
216
576

hbo

260
91

' hhS
210
255
250
243
277
180
275
283
212
258

2h2
UL2

Subsequent to
date shown
State and
Corporate
Other 2/
local govt.

30 •
15
*
. 35
30
30
77
50

280
372
372
3Wi
357
553
155 •
1,006
731
836
585
335
1,036

5#
310
#5
280
258
502
380

30

.
.

35
60
30

32k

283
336
391
560
682

127
50

Forthcoming Large Offerings, as of January 20
Amount
T
" " ~~
(millions APProx.1»t.e d a t e
of dollars) l ° f ° l i e r l n e
CORPORATE
Lone Star Gas Co.
Brunswick Corp.
Montgomery Ward Credit Corp.
Montgomery Ward Credit Corp.
Consolidated Natural Gas Co.
Southern Co.
•aPuget Sound Pwr. & Light Co.
•^American Machine & Foundry Co.
American Telephone & Telegraph Co.
Commerce Oil Refining Corp.
Liberian Iron Ore, Ltd.
Realty Collateral Corp.

Com. stk.
Conv. sub. deb.
Deb.
Sub. deb.
Deb.
Com. stk.
Bds.
Conv. deb.
Com. stk.
Deb., bds. & com.
Bds. & stk.
Coll. tr. notes

Jan. 23
(rights expire)
Jan. 25
25.6
I rights expire)
Jan. 27
25.0
Jan. 27
25.0
Feb. 8
15.0
Feb. 11
30.0
Feb. 15
15.0
Mar. 16
ho.5
(rights expire)
March
e/800.0
(rights expire)
Indefinite
1*5.0
Indefinite
30.0
Indefinite
20.0
26.2

STATE AND LOCAL GOVERNMENT
New York City, New York
State of Maryland
State of Connecticut
^Milwaukee Co., Wise.




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

7 6.5
20.3
29.0
10.3

Jan.
Jan.
Feb.
teb.

2t
i
2h
1
3

J-2

. -15-

Forthcoming Large Offerings, as of January 20 (Cont'd)
Issuer

Type

Amount
Approximate date
(millions
of offering
of dollars)

STATE AND LOCAL GOVERNMENT (Cont'd)
Houston Ind. Sch. Dist., Texas
State of North Carolina
*State of Texas
*St. Louis, Missouri
Baltimore, Maryland
Dallas, Texas
Kentucky Turnpike Authority
Los Angeles Dept. of Wtr. & Pwr.,
California
Orleans Parish School Dist., La.
Dade County, Florida
New York State Housing Fin. Agency

G.O.

0.0.

G.O.
G.O.
G.O.
G.O.
Rev.

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

11.0
10.0
12.5
15.8
47.0
19.0
38.0

Feb. 6
Feb. 8
Feb. 9
Feb. 15
Feb. 15
Feb. 20
Indefinite

12.0
10.0
1*6.0
100.0

Indefinite
Indefinite
Indefinite
Indefinite

OTHER

*—Included in table for first time.
e/ Estimated.
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.




-Ids-

Exhibit K
Yields oh New and Outstanding
Electric Power Bonds, Bated Aa and A 1/

Date

1952-1959

High
Low

1 # 9 - July
Aug.
Sept,
Oct.
Nov.
Dec.
I960 . Jan.
Feb.
Mar.
Apr.
May 10
12
25
June 17
28
29
July 8
13
Sept. 15
23
28
Oct. <
21
Nov. U

Aa-rated offering yields A-rated. offering yields
Amount above
Amount above
Actual
Actual
(per cent) seasoned yields (per cent) seasoned yields
(basis points)
(basis points)
5.30 (12/8/59) 8?
2.93 (3/3I/5I1) -3
*4.93
lt.83
5.132/
*5.08
*5.30 '
5.0 9

h.82

li.91
L88

31
23

5.07

17

36

*5.65
5.33

60
13
*

*5:3^

51
28

k.9 7
5.1k

35

1*2

63

bS
25
37
32

5.10

' 5.20
h.82
I. 8*
t 1

25
27

L95

26
33
11

lt.93
I . 88
t
I . 80
t

11
8

I1.88

27
17

26

5.05

U3

21*

2k
22

16

33
W

17
18
Dec. 7
1961 - Jan.. 1?
13

5.65 (9/18/59) 123
3.00 (3/17/5U) -15

5.00

k9

•—Single observation, not an average.
3/ Covers only 30-year first mortgage bonds, as reported in Mooch's Bond Survey.
Except where indicated, the actual yield figure and the amount above seasoned
yields are averages of offerings during the indicated period end of the differences between theca now- offering yields and yields on seasoned issues of similar
quality for the came day. Average saturity for the seasoned issues varies fro*
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
http://fraser.stlouisfed.org/ provision. Other issues have no such provision.

Federal Reserve Bank of St. Louis

-17°
January 23, 1961
Part II •• Canada
=
Interest rates had a slight rising tendency in Canada during the
week under pressure of new security offerings and securities sales by the
Bank of Canada . A $100 million issue of new 3-year Government of Canada
bonds was oversubscribed, and more offerings are expected in the hear
futureo Some foreign interest was reported in the new issue. Canadian
short Treasury bills continued to exceed the U.S. bill yield by almost 1
per cent per annum, but on a covered basis the incentive to hold the
Canadian bill declined as a result of a widening of the discount on the
forward Canadian dollar. Stock prices rose to the highest levels in over
a year. The Canadian dollar showed little change and closed last Thursday
at about 100,7 (U.S. cents).
Money market. The average yield on the Canadian 3-month Treasury
bill at last Thursday's auction rose k basis points from 3,18 per cent on
January 12 to 3=22 per cent on January 19 (see Table), The average yield
on the 6-month bill also rose slightly from 3,1*8 per cent on January 12 to
3°53 per cent, last week. The Bpnk of Canada sold $lU million pf bills
last week, while the chartered -banks purchased $10 million and the general
public purchased $3 million. The average closing rate on day-to-day
loans showed no change from the previous week at 2.80 per cent per annum.
The spread favoring the Canadian over the United States short
Treasury bill widened just slightly to 0,95 per cent per annum during the
week-(see Table), A wider discount on the forward Canadian dollar reduced
£he net incentive to hold the Canadian bill on a covered basis from 0.66
per cent per annum to 0,H5 per cent last week (see Table).
Bond market. There was only a slight upward drift in yields on
Canadian bonds 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 parentheses refer to the
previous week):
0,95
1.06
0.78
1.29
1,f?0

per
per
per
per
per

cent
cent
cent
cent
cent

on
on
on
on
on

a 91-day bill (0,91)
a 182-day bill (0,98)
an 80-year bond (0,82)
a 30-year bond (1,29)
a 35-year bond (l,f>0)

The Bank of Canada reduced its holding of bonds by $2$ million and the
chartered banks sold $17 million, while the Government accounts purchased
$23 million and the general public purchased $17 million (see Table).
On January 18, the Minister of Finance accounted a new $100
million, 3-year Canadian bond issue as the first step in financing the $525
million issue which will mature May 1, 1961, The new issue was oversubscribed with strong foreign demand, especially from Europe, The offering
was for noncallable k per cent bonds, at 98,50, to yield U,50 per cent to




-18=

maturity on May 1, I96I4.0 Another $50 million of this issue will be taken
by the Bank of Canada in exchange for an equal amount of the May 1, 1961
maturity. The Minister of Finance announced that, as a result of the
successful savings bond drive, the Government has sufficient funds to
permit it to retire the remaining $325 million of the maturing issue and
follow in an orderly fashion with new bond offerings in the coming months.
Ontario Hydro offered $50 million of bonds last week with a choice
of two maturities as follows: (l) 20-year, 5-1/2 per cent bonds, at 97
yielding 5«75 per cent; (2) 10-year, 5-l/U per cent bonds, at 99, to
yield 5.375 per cent. While the price of the new issue was not considered
very generous, demand was reported heavy. Demand from U.S. investors,
however, was reported to be light.
A $15 million, 20-year bond issue by Irving Oil Co. is expected
soon, to be priced at a discount with a 6 per cent coupon. Alberta Trunk
line is now reassessing its plans for a $50 million mortgage bond placement in the U.S., since the yield would have to be higher now because of
the recent increase in the withholding tax.
Consumer credit. In recent years consumer debt has been increasing faster than disposable income. At the end of September I960
consumer debt was Hi.3 per cent of disposable income compared with liul
per cent in 1959 and as little as 8.9 per cent in 1952 (see Table)e There
has also been a tendency in the last two years for longer repayment periods
to be offered in the financing of nondurable consumer purchases (see
Table), but the periods remain shorter than the average for the United States.
Foreign exchange. There was little fluctuation in the rate on the
Canadian dollar during the week with the spot rate closing at 100»66
(U.S. cents) last Thursday compared with 100.63 (U.S. cents) the week
before. There was some upward pressure on the rate early Wendesday when
the Government offered a new $100 million bond issue; the rate rose to
100.8 (U.S. cents) but eased to 100,7 (U.S. cents) later in the day. There
was some widening of the discount on the 3-month forward Canadian dollar
as the spread of the Canadian over the U.S. bill yields continued close
to 1 per cent for the 3-month bill.
Stock market. Industrial stock prices on the Canadian exchanges
continued to rise through the week, with the Toronto index exceeding the
high of early I960. The following table compares industrial stock prices
in Toronto, Montreal, and New York's Standard and Poor:




-19Toronto

Montreal

- High
Low

532.26
U72.38

320.0
250.3

- Jan, 6
9
10
11
12
13
16

529.69
532.06
533.00
532.68
532.39
53k,25
536.13

282.0
283.2
285.6
286.8
286.9 .
290.2
289.6

New York
Standard & Poor
• 65.00
55.98
61.86
61.19
62.58
62.76
63.07
63.07

The volume of stock sold on Canadian exchanges rose sharply during the
week ending January 13, to $lli,656 million compared with $9,8# million
the week before.

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




-20-

Selected Canadian Honey Market and. Related Data
3-mo. Treas. bills
Spread
Canada
u . s j / over U.S.

1960 - High
Low

6.16
3.25
5,lU
1.68

kM9
2.80
a. 63
2.10

2.96
0.30
1.62
-0.82

Dec. 29
Jan. 5
12
19

3.25^"" 2 , 1 7
2.27
3,3^
3.18
2.27
2.27
3.22

1.08
1.07
0.91
0.95

1959 - High

Canadian dollar
3-mo. discount (-1
Spot
forward premium (+)<y
105-51
102.58
105.27
100.33

-

Net incentive to
hold Can.
bill®/

0.99
-0.91

100.33
100.hi
100,63
100.66

100.22
100.36
100.56
100.53

1.99
-0.57

-0.U3
-O.UU
-0.25
-0.50

0.65
0.63
0.66
o.U5

a/ Average yield at weekly tender on Thursday.
2/ Conposite market yield for the U.S. Treasury bill on Thursday close of business,
c/ In U.S. cents.
cf/ Spread between spot rate and 3-month forward Canadian dollar on Thursday
closing, expressed as per cent per aanum.
e/ Spread over U.S. Treasury bill (column 3)» plus 3-month forward discount or
premium (column 6)*
Selected Government of Canada Security Yields
6-moe Treas.bills
Spread
Canada
1959 - H i g h
1960 - H i g h
Low

6.2U
5.11
5.33
1.99

D e c . 29
Jan. 5
12
19

1.37
-0.86

5.27
50
5.55
U.09

1.11
0.21

1.17
1.15
0.98
1.06

U°7U
. b.70;
U.68
U.73

1.00
0.99
0.82
0.78

3.5k
3.63
3-U8
3.53

J
c/
<y
e/
z/
g/
n/

Long-term bonds
(35 year)
(20 year)
Spread
Spread
Canada
Canada

Intermediate
bonds (8 yr.)
Spread
over
Canada
U.S.d/

a.

Mk

Mk

.

5.30
U.UU
5.U2
U.63
5.19
5.19
5.17
5.20

1.36
0.85

5.05
U.73
5.28
U.68

1.61
0.95

1.37
1.37
1.29
1.29

5.23
5.23
5.20
. 5.20

1.57
1.59
1.50
1.U7

Average yield at weekly tender on Thursday.
Spread between Canadian auction rate and composite market yield of U.S.
on close of business Thursday.
Government of Canada 2-3/U per cent of June 1967-68.
Spread over U.S. Government 2-1/2 per cent of 1963-68.
Government of Canada 3-lA per cent of October 1979.
Spread over U.S. Government 3-l/U per cent of 1978-83*
Government of Canada 3-3A per cent of September 1996 - March 1998.
Spread over U.S. Government of 1995.




-21=

Canada: Changes in Distribution of Holdings of Canadian
Government Direct and Guaranteed Securities
(millions of Canadian dollars, par value)
Bank of Canada
Treas.
Bonds
bills
Novo 17

2h

Dec. 1
8
15
22
29
Jan. 5
12
19

Source*

+ 10
- 3
+ 3
- 3
+ 1
- 9
0
- 2
- 12
- 25

+ 3
+ 1
+ 10
+ 9
- 2

- 5

+
-

Government
Total

3
2
9

- Ik

+

1
8

+ 2h
h

-

- 6
-103
+ 2
- 11
+ 16
+ 25

Chartered banks
Treas.
Bonds
bills
+
+
+
+
+

+
+
+
-

28
30
21
7
13
18
6
18
39
10

General public
Savings Treas.
bonds
bills
Bonds

6
3
8
28
5
23
Hi
12
2
17

+151
+271
+ u
- h
- 13
- 11
- 8
- h
+ 16
- 7

Bank of Canada, Weekly Financial Statistics•

Consumer Debt as Per cent of Disposable Income
~
~ (in per cent)
~
"
"
I960
1959
1958
1957
1956

llu3
lU.l
13el
12„7
13,0

1955
195U
1953
1952

12 . h
' 11.2
10.5
8.9

Average Repayment Terms in Months
19*8
New cars
Used cars
Other consumer goods
Other commercial and
industrial goods
Source:

The Financial Post.




I960

2Ud
17.0
20.1

26.8
17.6
-2U.5

25.1

28.3

+
+
+
+
+
-

26
29
3
1
19
ll

- 15
- 2-U
+ 3

+
+
-

17
5
27
31
U
62

- 2k

+ 10
- 11
+ 17

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