Full text of H.16 Capital Market Developments : January 9, 1961

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Hot

H.lU

for

Publication

j ,

E C O N T E O

L L E D

APTEE

S I X

HOKTHS

~ !
'

January 9, 196l.
o m m * M M E 2 DEVELOPMENTS
IN THE UNITED STATES AND CANADA
Part I - United States

No large security issues were sold during the holiday-shortened
week between Christmas and New Year's and last week, ending January 6,
the only public offering was a $l£ million State and local government
bond issue. Sale of another large State and local government issue—
$29 million of State of Connecticut bonds—that had been scheduled for
last week was delayed indefinitely, reportedly for technical reasons.
This week no large corporate issues are scheduled, but three State and
local government bond issues totaling $li*2 million are on the calendar.
Bond yields - Changes in long-term bond yields have been mixed
recently. Yields on State and local government bonds increased somewhat
on balance during the last two weeks while yields on corporate and U. S.
Government bonds declined slightly.
Uo S. Government long-term bond yields, at 3.84 per cent last
week, were 58 basis points lower than a year earlier. Aaa-rated corporate
bonds yielded ii.3U per cent, 21 basis points less than in early January
of I960, while State and local government Aaa-rated bonds, at 3.13 per
cent, were I4O basis points below the year earlier level.
Short- and intermediate-term interest rates - Yields on Treasury
bills rose last week, more than offsetting a decline the preceding week.
Yields on three- to five-year Treasury obligations changed little last
week.
Interest rates on the shorter maturities of directly placed
finance company paper in the three- to six-month range were reduced oneeighth per cent last week. Other short-term interest rates remained
unchanged.
FNMA secondary market operations - Secondary market operations
of the Federal National Mortgage Association in November indicated some
further easing in residential mortgage markets. Offerings of mortgages
to FNMA and purchases by FNMA declined to the lowest level since the
spring of 1959 and FNMA sales totaled $8 million, the largest volume
since the summer of 1958,
January new security financing volume - Sales of corporate
securities to raise new capital in January are expected to total only
#500 million, one-eighth less than a year earlier and sharply below the
December rate.




State and local government bond sales in January are expected
to total $750 million, about the same as a year earlier, but 50 per cent
more than in December.
Stock prices - Common stock prices have increased during the
last two weeks, closing at 58.1*8 on Friday. Trading volume continued
to be heavy. Stock prices, as measured by Standard and Poor's index
of 5b0 common stocks, have risen 5 per cent since the end of November
i960 and at the Friday level were only 3 per cent below .their early i960
high.
More detailed information concerning recent capital maiket
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.




LONG-TERM

BOND

YIELDS

HIGH-GRADE




r

/vf

U.S. G O V E R N M E N T

l \

11.1k

Date

Corporate
Aaa 1/

U. S. Govt,
long-term 2/

2.85 (4/23)

2.45 (8/6)

(Per cent)
Low
High
Low
High
Low
i960 - High
1954
1957
1958
19 59

Dec.
Dec.
Dec.
Dec.
Jan.

-5-

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

-

9
16
23
30
6 2/

U.lit (9/27)

3.55 (5/2)

it. 61 (12/31)
lt.09 (1/9)
4.6l (1/29)
4.23 (9/9)

3.76 (10/18)
3.07 (it/25)
it. 37 (12/31)
3.83 (1/2)
4.42 (1/8)
3.75 (6/5)
3.94
3.86
3.66

4.35
k.3h
k.3h
4.35
4.34

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

State and
local govt.
Aaa y

m

i.90 (9/2)

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

'

3.12
3.11
3.13

.41
.48
.48
.53
.50

Z/.82
V.74
.74
.71
.71

3.06 (3/26)

.

3.62
3.84

.30
.it?
.34
.92
.53
.92
.53

.30
.60
.22
.50
.16
.'59
.19

Lower-grade

Date

Corporate
Baa 1/

State and
local govt.
Baa y

Spread between
Aaa and Baa
State and
Corporate
local Rovt.

(Per cent)
-

Low
High
Low
High
Low
1960 - High
Low

3.44
5.10
lt.51
5.32
4.83
5.36
4.98

Dec.
Dec.
Dec.
Dec.
Jan.

9
16
23
30
6 2/

5.11
5.10
5.09
5.09
5.08

1954
1957
1958
1959

(12/31)
(11/29)
(7/11)
(12/31)
(4/17)
(2/12).
(9/9)

2.93 (8/5)

5:8
5
:8 ®8,
4.46 (1/7)

• .52
1.27
.77

.96
1.21

:S

3.98 (12/22)

'.56
.84
.71

.86

4.06
4.06
3.98
3.98
4.03

.76
.77
.75
.74
.75

.87,
.90

p/ Preliminary.
1/ Weekly average of dally figure*. Average term of bonds Included 1* 25-26 years.
2/ Haekly average of dully figures. The series Includes bonds due or callable In 10 years or more.
3/ Thursday figures. Only general obligation bonds are includedt average term Is 20 years.
Note.—Hl^is and lows are for Individual series and mey be on different dates for different series.




Xj
I EXHIBIT C
SHORT-

AND

INTERMEDIATE-

TERM

INTEREST

RATES

GOVERNMENT

j3 - 5

YEA!

ISSUES

PRIVATE




CAU

10AHS

' [FINANCE COMPANY P A N :
foiractly Placed

t

Exhibit D - Tables for Exhibit G
Short- and Intermediate-term Interest Rates
Government
Date

Discount
rate 1/

Yields
6-month
bills 2/

3-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)
1954
1957
1958
1959

Low
High
Low
High
Low
If60 - hiph
Low
Dec.
Dec.
Dec.
Lcc.
Jan.

-

9
16
23
30
6 2/

.61 (6/11)

1.66
4.04
3.02 (12/26) 2.14
4.91 (12/31) 5.00

(4/30)
(10/18)
(6/6)
(12/21*)

1.50
3.50
1.75
LOO

»:§

3.00

5.07 (1/8)
4.97 (1/8)
4.59 (1/8)
2.11 (10/28) 2.38 (12/30) 3.hO (12/30)

2.50
Loo
3.00

3.00
3.00

3.00
3.00

3.61* (10/18)

2.63 (2/20) 2.92 (1/2)

2.28
2.25
2.24

2.18
2.28

2.62

3.70 (1/2)

3.59
3.49
3.46
3.40
3.39

2.50
2.1x2
2.38

2.48

.26

.66
.86

.79
.19
.58

.16

.04
1.42
.40
1.81
.38

.34
.25

1.31
1.24

.18
.20

.20

1.22
1.22

1.11

Private

Date

Stock Exchange
call loan 1/

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

Low
High
Low
High
Low
I960 - High
Low

3.00
4.50
3.50
5-00
4.00
5.50

3.00
4.50
3.50
5.00

Dec.
Bee.
Dec.
Dec.
Jan.

4.50

4.50
4.5o
4.5o
4.5o

1954
1957
1958
1959

-

9
16
23
30
6 p/

4.50

4.50
4.5o

4.50
4.50

4.oo

5.oo

4.50

4.5o

1.25
3.88
1.13
4.88
3.00
5.13
2.88
3.01
3.06
2.91
2.88
2.83

(12/31)
(11/15)
(8/8)
(12/31)
(3/6)
(1/22)
(11/4)

0 (12/18)
.59 (7/19)
-.35(8/29)
.86(10/9)
.13(12/4)
1.02 (3/25)
.22 (4/15)
.73
.81
.67
.70
.55

Weekly rate shown Is that In effeot at end of period. Discount rat# la. for Federal Reserve Bank of New York.
Stock exchange call loan rate is going rata on call loans secured ty oustoaers* stock exchangu collateral at
New York City tonka. Prime rate Is that ohargud by large banks on short-tera loans to bualnoas borrowers of
the highest credit standing.
Market yield; weekly avero#ee computed fro* dully cloning bid prices. „ Surles of 3-5 year Issue9 ooncleto of
eeleoted notes and bonti.i.
Avara.Ru of lUlly rat*.1 pul.lleh*d t-y f l m n u i oompanles for dlreotly placed paper for varying maturities In the
90-179 duy ruivi«.
t
U«he u'/id lows are for Individual surles.u,nd' t
»l/i" roi.ro to widest, and low to narrowest;.'




4
STOCK

MARKET

FEDERAL

NATIONAL

SECONDARY

MARKET

MORTGAGE
OPERATIONS




ASSOCIATION

Exhibit

i* - T a b l e s
Stock

lor

Market
Trading

Common
Stock

price

index 1/

Exhibit

Stock market

(millions

(per cent)

of

customer credit

Customers1

volume y

stock
yields 2/

Total

shares)

ances
(Millions of

I960

60.51

- high
Low

IS57-59

(7/31/59)

39.78 (12/27/57)
# . 5 0 (1/8)

- hioh
Low

(10/21)

#.32

Bank

debit bal-

loans

4/

dollars)

3,554

3,401
2,1,82

1,373
1,060

4,365

1,198

1,184

3.07
4.66

4.3
1.4

*4,7 oil.

3.18
3.62

4.1
2.2

4,132

3,004

1,111

4,294

1,153

3.7

3,14L
n.a.
n.a.

1,170

3.35

3.7
li.l

n.a.

1,184

3.32

3.6

November

#.47

3.51

3.1

December

56.83

3.Ill

Dec.

2]

57.a

3.39

Dec.

30

58.11

Jan.

6 q/

58.1,0

.

to

"others" 5 /

1,184

n.a.

n.a.

n.a.—Not available.
g/ Preliminary.
1/ Standard and Poor's composite index of 500 ooirmon 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.
2I Standard and Poor's composite stock yield based on Wednesday data converted to weekly closing prices by
Federal Reserve. Yields shown are for da tea on which price index reached its high or low.
3/ Averages of daily trading volume on the New York Stock Exchange.
4/ Bid of month figures for member firms of the New York Stock Exchange which carry margin accountsi excludes
balances secured by U. S. Government obligations.
5/ Wednesday figures for weekly reporting member banks. Excludes loans for purchasing or carrying U, S.
Government securities• Prior to July 1, 1959, such loans are excluded only at banks in New York and Chicago,
Weekly reporting banks account for about 70 per cent of loans to others. For further detail eeo Bulletin.
Federal National Mortgage Association
E s t i m a t e d O f f e r i n g s to
Date

Total

Immediate
purchase

Secondaiy Market Operations 1 /
l

l 'NhA
Standby
commitment

Furclmses
by
MMA.

Sales
b

y

l-'NMA

(Millions of dollars)
1S; 5 9
I960

-

Nov.
Bee.

105.6

100.3

5.3

92.6

116.3

111.4

4.9

92.2
L6.1

137.6

128.3

Feb.

135.8

128.9

Mar.

133.2

121,. 6

Apr.

103.5

96.2

7.3

135.0
102.6

98.5

93.8

99.9
88.0

93.7
82.9

4.7
6.1

91.9
# . 8

1.0

5.1

93.7

3.2

104.0
r j7 3 . 0

89.1

14.8
r/3.3

75.6
63.0

.1

r/69.8
68.6

14.6

58.8

1.1

4.8

51.6

8.9

- Jan.

May
July
'

Aug.
Sept.
Oct.
Nov.

2/

83.2
62.0

56.9

.

9.3
6.9
8.6

116.7

M i l
ocimttecirt contractu.

3.6

.8

Data exclude FNIiA activity under Special Assiotance and Management and

Liquidating Programs.



-10-

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

"
January
February
March

W

e/500

April
May
July
August
September
October
November
December
1st
2nd
3rd
4th

quarter
quarter
quarter
quarter

1st half
Three Quarters

Year

New capital
State and local 2/
Corporate 1/
I960
1961
I960
1959
1959
e/750

577
715
860

821
738
61*6

766
567
1,034

894
785
887

1,033

932
593
1,006

727
962
738

535
740
703

572
602
689

567
516
465

2/965
e/875
e/850

679
864
900

336
a/468
e/500

597
519
455

2,151
2,367
2,127
2/2,690

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

1,943
2,314
1,863
e/l,3c4

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

4,519
6,915
E/9,635

4,771
6,750
9,392

4,257
6,200
e/7,424

4,674
6,222
7,793

739
623

582
731
#0

639

858
646

including finance companies 3/
•1st
2nd
3rd
4th

quarter
quarter
quarter
quarter

Year
e7
1/
2/
3/

_ L

1,722
2,150
2,017
2/2,290

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

2/6,179

8,630

iLsti ma tedl
~£7 PrelHi ina ry.
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.




H.l'j

Exhibit

h

Other Security Offerings 1/
(In millions of dollars)
'
Long;-tern
Federal agency 3/"
Foreign government 2/ """"
I960
I
1959
I
19ffi
I960
|
1959
1958
January
February
March

2
175
70

81
60
2

196
53

April
May
June

34
72
kO

• 58
50
42

139
198
120

12*8
354

July
August
September

25
1
36

85
1
.35,

9
5
17

199

October
November
December

34

33
30
70

58
123
Ik

2/100

Year

547

992

182
150
150

199

523

16k
98
150
220

160

2/183,

86

E/%,621

707

371
208
144

July
August
September
October
November
December

I

April
May

!

State and local government b/

January
February
March

1,163
251

175

2,321
3/

268

190
128
,2#

233
460
273

k!9
475
511

359
500
489

365
351
297

563
kll
215

26 4

m

509
632
435

486
075
289

209
161
329

280
,505
199

216
167
399

289
423
369

312
468
296

727
§

437
206
330

358

415
213

In
288

454
114
137

It,17?

3,910

6,047

3,090

%

' 254
2/418

Year

&

241
282
177
2/4,817

e/ Praltelfkiry.
1/ Drvta presented in this exhibit differ from thajj in Exhibit E in that refunding isiuos, an well as
capital issues, ere Included. Long-term securities are dflfined as those neituKny in n^ro thar. one year.
2/ Inoludnt ieour1ties offured in the United States by foreign j$overr»ont» and their rubdtvlblons end by
ln'.ermt'.onal organizations. "ihotji Securities ami r.jcuhr.mjH Commission.
3/ Ianuts not gunrs^tcod by the U. S. Gov<rniev.!.. Souroai long-tons, Soourltlea and BtahMKt CornilrtiToaj
short-term, Federal Reserve.
4/ Principally tax and bond anticipation not*s, warrants or certificates ar.d Public Housing Authority
not**. In some instances l'HA r.itee inoluded may have a somewhat longer ton* than one year. Source: Eond Buyer.




-12-

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

Month

Corporate

JL959 - December
I960 - January
February
March
April
May

State and
local government

230
279
262

July
August
September
October
November
December

'

217
388
283 225
370
23li
561
191
298
367
h6
186
222

309
139
Uh2
303
581
266
566
165
260

Other 2/

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

Large Individual Issues Offered January 1 through 6

Type 3/

Amount
Coupon
(millions Maturity
°y£dn8
net interof .
dollars)
est cost

CORPORATE
None
STATE AND LOCAL GOVERNMENT
Fulton Co., Georgia

G.O.

OTHER
None
1




111.5

1962-87

3.28

1.50-3.15

Aa

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.
3/ In the case of State and local government securities, G.O. denotes general
obligations; Rev.-Uto, revenue obligations secured only by income from public
utilities; Rev. -Q.Ut., revenue bonds secured only by revenue from quasiutilities 3 Rev.-S.T., revenue bonds secured by revenue from specific taxes
only; Rev.-Rent., revenue bonds secured solely by lease payments.




-lU-

1* orthcoming Large Long-term Public Security Offerings for New Capital
(Other than U. S. Treasuiy) 1/
Expected Proceeds from Forthcoming Large Issues
• During month following
date shown
State and
Corporate
Other 2/
local govt.

Bate of
computation

1959 - Dec. 31
IS60 - Jan. 29
Feb. 29
Mar. 31
Apr. 29
"
May 31
June 30
July 29
Aug. 31
Sept. 30
Oct. 31
Nov. 30
Dec. 30

!

210
207
301
299
202
U83
237
596
216
576
ao
26o
91

to

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

30 .
15
35

210
255
250
2h3
277
180
275
283 .
212
258
2h2
UL2

30
30
77
50

280
372
372
3^
357
553
1*55
1,006
731
836
585
335
1,036

30
16
35

51*5
310
365
260
258
502
380
321
263
336
391
560
682

60
30
127
50

Forthcoming Large Offerings, as of January 6
Issuer

Type

Amount
Approximate date
(millions
of offering
of dollars)

CORPORATE
Texas Eastern Transmission Corp.
Texas Eastern Transmission Corp."
Lone Star Gas Co.

Pfd. stk.
1st mtg.p.l.bds.
Com. stk.

Brunswick Corp.

Conv. sub. deb.
Deb.
Sub. deb.
Com. stk.

Montgomery Ward Credit Corp.
Montgomery Ward Credit Corp.
American Telephone & Telegraph Co.

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

Commerce Oil Refining Corp.
Liberian Iron Ore, Ltd.
Realty Collateral Corp.

.15.0
30.0
26.6
25.6
25.0
25.0
e/800.0
u5.0
30.0
20.0

Jan. 18
Jan. 19
Jan. 23
(rights expire)
Jan. 25
(rights expire)
Feb. 2
Feb. 2
March
(rights expire)
Indefinite
Indefinite
Indefinite

STATE AND LOCAL GOVERNMENT
Port of New Orleans, La.
Los Angeles, Calif., School Dists.
State of California
State of Oregon
State of New York
---Montgomery Co., Md.
•xContra Costa Co. Wtr. Dist., Calif.




f
J
j
|

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

-17.0
30.0
95.0
30.0
63.5
11.0
12.8

Jan.
Jan.
Jan.
Jan.
Jan.
Jan.
Jan.

9
10
11
17
17
17
18

Forthcoming Large Offerings, as of January 6 (Cont'd)
Issuer

Type

Amount
Approximate date
(Millions
of offering
of dollars)

STATE „ND LOCAL CtiVERM-MT (Cont'd)
Pennsylvania St.Pub.Sch.Bidg.Auth.
New York City, New York
State of Maiyland
Baltimore, Maryland
State of Connecticut
Los Angeles Dept. of Wtr. & Pwr.,
California
Orleans Parish School Dist., La.
Kentucky Turnpike Authority
Dade County, Florida
New York State housing Fin. Agency

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

20.6
76.5
20.3
17.0
-29.0

Jan. 18
Jan. 2i±
Jan. 2k
Feb. ,
Indefinite

12.0
10.0

Indefinite
Indefinite
Indefinite
Indefinite
Indefinite

55.0

1+6.0
100.0

OThER
None
*—Included in table for first time.
e/ Estimated.
1/ Includes corporate and other issues of §1.5 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.




-16-

Bxblbit K
Yields oh New and Outstanding
Electric Power Bonds, Rated Aa and A 1/

Date

1952-1959 - High
Low
1959 - July
• Aug.
Sept,
Oct.
Nov.
Dec.
19&) - Jan.
Feb.
Mar.
Apr.
May 10
12
25
June I?
28
29
July 8
13
Sept. 15
23
28
Oct, 5
21
Nov, k
16
17
18
Dec. 7

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) 87
2.93 (3/3V5U) -3
*4.93
it. 83

•

31
23

5.13^
*5.08
*5.30

36
142
63

5.09

145
25
37
32

1.82

4.91
L88

L82
k.Bk

25
27

5.65 (9/18/59) 123
3.00 (3/17/5U) -15
5.07

17

*5.65
5.33

60
1*3

»!:&/

51
28

h.97

5.1U

35

5.10

5.20

26
33
11

1.93

11
8

U.95

li.88
27
17
2k
22
14.78
ii.8 5

33
hO

5.00

. h9

L80

2k

I1.88

26

5.05

U3

•—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 naturity 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.
http://fraser.stlouisfed.org/

Federal Reserve Bank of St. Louis

January 9, 1961
Part II - Canada
Canada:

Money and Capital Markets in December

After rising sharply in October and November, Canadian short-term
rates declined in December and bond yields showed little change. Canadian
bill and bond yields remained substantially above United States yields.
Stock prices rose through the month to the highest since last February.
The special budget introduced on December 20 provided a number
of tax adjustments designed to encourage Canadian investment trusts and
pension funds to retain most of their assets in Canada and to discourage
Canadian bodies from borrowing in foreign currencies abroad. In addition,
special tax advantages designed to encourage foreign private and corporate
investment in Canadian securities and in physical resources were withdrawn.
The immediate impact of the program was to push the Canadian
dollar down from 102 U.S. cents to a low of 100-3/10 U.S. cents. But the
decline came to an end and on January $ the dollar closed at 100.63 U.S. cents.
Seasonally adjusted chartered bank loans continued to expand in
December, making the total increase since last February almost 8 per cent;,
There was also a further increase in the money supply which probably
reflects seasonal needs; the money supply rose almost U.5 per cent since
April 1, I960.
..
Money market. Canadian Treasury bill yields declined during
December after rising sharply in October and November. The average yield
on Thursday auctions for the 3-month bill declined 70 basis points from
3.95 per cent on December 1,_to 3.2$ per cent on December 29 (see Table and
Chart). The average yield on the 6-month Treasury bill declined 53 basis
points from U.07 per cent on December 1, to 3ȣU per cent on December 29
(see Table). During the month the general public purchased $12 million
of Treasury bills and the Bank of Canada purchased $9 million while the
chartered banks sold $17 million (see Table).
During, the month, the spread in favor of the Canadian bill compared
with the United States bill declined from 1.62 per cent on December 1, to
1.08 per cent on December 29. With exchange risk covered, the net incentive
to hold the Canadian bill declined during this period from 1.19 per cent
to 0.65 per cent.(see Table and Chart).
Yields on shoft-term commercial paper in leading Canadian
acceptance houses remained relatively steady through December but declined
slightly at the end of the month. The spread favoring the Canadian paper
widened during the month but narrowed again at the end of December and the
spread of 1.12 per cent on December 29 was unchanged from December 1.




-18-

Yields on Commercial Paper in Leading Canadian & U.S. Acceptance Houses
Canada
December 1
8
15
22
29

U.S.

3«75 - U.00
3.75
3.75 - U.00
3.75 - k.00
3.50 - 3.75

Spread

2.75
2.20-2.75
2.50 - 2.75
2.38 - 2.63
2.38 - 2.63

1.12
1.13
1.25
1.37
1.12

Bond market. After rising sharply during the preceding two
months, Canadian bond yields showed little change during December. Mcleod,
Young, Weir's UO bond average was the same on December 31 as on December 1
and the changes in yields in the principal local governmental and private
sectors of the capital were limited, as the following data show:
McLeod, Young, Weir Bond Yield Average
(per cent per annum)
Oct, 1
10
10
10
10
UO

Provincials
Municipals
Public utilities
Industrials
Bond yield average

5.28 5.61
5.38
5.39
5.Wi

Nov. 1

Dec. 1

Dec. 31

5.140
5.60
5.29
5.2U
5.35

5.60
5.95
5.5U
5,62
5.68

5.68
5.97
5.U5
5.61
5.68

:

In the Government securities sector, price movements were limited
and mixed. The spread between comparable Canadian and United States
bonds remained unusually wide, as the following table shows (Thursday
yields for bills and Wednesday yields for bonds):

91-day bill
182-day bill
8-year bond
20-year bond
35-year bond

J
vlt.

Dec. 1

Dec. 29

f'•

+1.62
+1.37
+0.81
+1.25
+1.1*1

+1.08
+1.17
+1.00
+1.37
+1.57

X

V?

During the month, the bond holdings of the general public were
reduced by $78 million and those of the chartered banks by $3k million.
These sales were presumably financed largely by reducing the Treasury's
cash balances .

^
',]lJ

In mid-December, the Minister of Finance announced that the new
refunding issue of Government of Canada bonds was oversubscribed. (See
Money and Cpaital Markets during November, December 5> I960.) Offers for
the two maturities totaling $200 million available to investors had been
accepted as follows: $120 million in the 1962 maturity (1-1/2 year bond,
3 per cent coupon, offered at 98.75 to yield about 3.86 per cent to

Jfj»
:§
%
;w
V;
f




f*,

-Immaturity) and $80 million in the 1963 maturity (3-year, U per cent bonds
offered at 98.75, to yield U.U5 per cent to maturity) . In addition, the
Bank of Canada took $180 million of the 1962 maturity and $220 million of
the 1963 maturity.
Revised 1960-1961 budget. On December 20, the Minister of
Finance submitted to Parliament"a revised budget for the current fiscal
year ending March 31, 1961. The new budget shows a deficit of $286
million for the year compared with a surplus of $12 million in the original
budget submitted last March. Tax receipts declined $198 million as a result
of lower levels of economic activity over the last nine months, and expenditures increased $100 million largely as a result of technical adjustments
in the original budget.
Revised, tax measures were introduced to encourage Canadian
domestic investment and discourage foreign inflows of funds. The latter
included withdrawal of preferential tax treatment previously given to
certain foreign investors in Canada and local Government bonds, and the
introduction of new taxes on transfers of income from subsidiaries to
parent companies abroad and on income of branches of nonresident corporations.
The Finance Minister stated that the $286 million budget deficit
will not result in any increased financing by the Government during the
current fiscal year. While there are no other financing needs prior to
March 31, $1,399 million of Government debt will require refinancing
between April 1, 1961, and March 31, 1962, as follows t
May 1, 1961
Dec. 1, 1961
Feb. 1, 1962

$52$ million
$820.5 million
$23.5 million

Early in December, the Minister of Finance announced a new debtmanagement policy of making smaller and more frequent bond issues in more
manageable proportions. The new policy was welcomed by Canadian investment
dealers.
Chartered bank loans and money supply. General bank loans,
seasonally adjusted rose by $115 million from end-November to December 21
to a total of $5,13U million. The loan expansion has continued since
last February; with loans increasing by $363 million or by 7.6 per cent.
Outstanding loans now exceed the August 1959 high by $128 million (see Table).
The money supply rose by $73 million in December (through December 21,
i 9 6 0 ) , probably reflecting seasonal factors = The total increase in money
supply since the beginning of the fiscal year, on April 1, i 9 6 0 , was $562
million; an increase.of U.U per cent. The chartered bank average cash and liquid
reserve ratios decreased from 8 . 3 per cent and 17.2 per cent respectively
during the week ending November 23 to 8.2 per cent and 17 per cent in the
week ending December 28. The change was due almost entirely to the rise in
deposits while cash and liquid assets remained constant.




Average week ending
Average Cash and Liquid Position
Cash reserve
Cash ratio

1,021 mil.
8.3 %

Liquid assets
Liquid asset ratio

2,121 mil.
17.2 %

995 mil.
8.1$
2,lU0 mil..
17.U %

Stock market. ^Prices of industrial stock on the Canadian stock
exchanges rose through December to the highest levels since last February,
with the Montreal index, as the Standard & Poor industrial index, reaching
the highest of the year at the end of December. The following table compares industrial stock prices in Toronto, Montreal, and Standard & Poor
New York:
Toronto
I960 - High
Low
December 2
7
9
1U
19
21
27
29
30

232.#
U72.38
U99.00
500.91

Montreal

New York
Standard & Poor

277.1
250.3

61. U9
55.98

263.7
265.1

58.70
59.38
60.ll

505.63
509.25

. 267.0
268.6

511.uu
517.3k
518.31
5214.63
521.91

268.5
273.7
271.6
277.1
276.7

60.31
60.62
61.06

60.97 .
61.U5
61.1*9

Foreign exchange. The Canadian dollar fluctuated between 102.2
(U.S. cents) and 102.6 (U.S. cents) during the early weeks of December
but fell sharply on December 21 following the announcement late on
December 20 of new measures designed to discourage the inflow of foreign
capital. On December 21 the spot rate dropped below 101 (U.S. cents)
and recovered slightly later in the day. The rate continued to decline in
the following days but regained slightly in early January, closing at
IOO.63 (U.S. cents) on January 6 as noted in the following table:
Spot rate on
Canadian dollar
(U.S. cents)
December 1
7
20
21 low
21
30
January 5

102.22
102.#
102.00
100.98
101.19
100.33
100.63

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




Selected Canadian Money Market and Related Data

3 T r e a a . bills
Canada
, Spread
jJ
U . S M over U.S.

-21-

Net incenCanadian dollar
tive to
Spot
3-no, discount (-1 hold Can.
j/
forward premiuniC+W
hill*/

1959 - High
Low
1960 - High
Low

6.16
3o25
5.1b
1.68

U.U9
2,80
b.63
2.10

2.96
0,30
1,62
-0.82

105.51
102.58
105,27
100,33

Dec. 1
8
15

3o95
3o70
3 069

2,33
2,26
2.25

1.62
1 M
I.I4I4

102.22
102.3U
102.25

102.11
102.16
102.16

101.03

-0.91

0.33

100.22
100.36

-0.U3
-O.bU

0.65
0.63

.22

.

29
Jam. 5

3.16

2.22

1.2U

101.28

3.25
3.3b

2.17
2.27

1.08
1.07

100.33
100.U7

—
—
—

—
- 0.99
-0.91

1.99
-0.57

-0.1*3
-0.73
-0.35

1.19
0.71
1.09

a/ Average yield at weekly tender on Thursday.
b/ Composite market yield for the U.S. Treasury bill on Thursday close of business.
0/ In U.S. oents.
d/ Spread between spot rate and 3-month forward Canadian dollar on Thursday
closing, expressed as per oent per annum.
e/ Spread over U.S. Treasury bill (column 3), plus 3-month forward discount or
premium (column 6).
Seleoted Government of Canada Security Yields
6mmo. Treas. bills
spread

Intermediate
bonds (8 yr.)
spread

-term bonds
B L 5 5 2

Canada
1959 - High
Low
1960 - High
Low

6.2U
5.H
5.33
1.99

—
—
1.37
-O086

/ 5-27
U.50
5.55
U.09

—
—
loll
0,21

5.30
U.bb
5.U2
U063

1.36
0.85

—

5.05
U.73
5.28
U.68

Dec. 1
8
15
22
29

L .07
3.92
3.91
3.68
3.5U

1.37
1.3b
1.U5
1.26
lol7

U.72
U.73
U.71
U.69
U.7U

0.72
0.81
0.99
0.92
1=00

5.21
5.17
5.18
5.19
5»19

1.28
1.25
1.37
1.36
1.37

5.16

1.3U

5.19
• 5.23
5.23

1.52
1.56
1.57v

5.18

0/ Spread between Canadian auction rate and composite market yield of U.S.
bin on close of business Thursday*
0/ Government of Canada 2-3A per cent of June 1967-68.
a/ Spread over U.S. Government 2-1/2 per cent of 1963-68.
e/ Government of Canada 3-lA per cent of October .1979#
1/ Spread over U.S. Government 3-lA per cent of 1978-83.
fu Government of Canada 3-3A per cent of Septentoer 1996 - March 1998.
n/ Spread over U.S. Government of 1995#




—
—
1.61
0.95

1.1a

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
January
February
March
April
May
June
July
August
September
October
November
December
Source*

- 89
+ 55
+iui
+ 69
- 9
- Ik
+ 19
- - 23
- U3
+ 66
- 8
+ 9

- 1
-103,/
- 6U
+ 23
+ Hi
+ 77
+ Uo
+ 31
- 2
+ 6
+ 1
- 8

Government
Total
+
+
+
+
+
-

2U
23
5U
9
8
Uo
5i
78
6
37
IS
87

Chartered banks
Treas.
Bonds
bills
+ 81
-115
- 11
- Uo
+ 78
- 59
- 3
+ 36
+ 90
. - 5U
- uu
- 17

+ U
+ 79
+ 17
- U
+ 9
+ 27
- 28
- 12
+ US
+126
+ 29
- 3U

General public
Savings Tr6&8•
bonds
bills
Bonds
+ 3
- 29
- 31
- 26
- 29
- 31
- 19
- 26
- lU
- 5
+630
- 32

+
+
-

19
59
78
11
97
8
58
U2
Ul
0
+ 55
+ 12

+ 95
+165
+ 98
+ 30
- 18
+ U6
- 5U
- 80
- 36
+ 72
- U6
- 78

Bank of Canada, Weekly Financial Statistics.

Changes in New Issues of Canadian Government, Local
Government and Private Securities
,
(millions of Canadian dollars)
Total new
issues
Jan. 1 •- Feb. 1
Feb. 1 •• Mar. 28
Mar. 28 - May 2
May 2 - May 30
May 30 -• June 2?
June 27 - July 6
July 6 -- Aug. 29
Aug. 29 - Sept. 28
Sept. 26> - Oct. 2U
Oct. 2h - Nov. 28
Nov. 28 - Dec. 19

950.7
1,008.6
56 .U
626.6
670.8
901.7
6U6.U
81U.1
55U.1
1.53U.6
1,0U3.8

Less
short-term
510.0
580.0
6U5.0
-U80.0
U80.0
U80.0
600.0
U80.0
U90.0
620.0
U60.0

Source: A. E. Ames & Co., Weekly Bond Sales Summary.




Total
long-term
UU0.7
U18.6
208 .U
136.6
191.8
U21.7
U6.U
33U.1
6U.1
•9lUo6 .
583.8

Issues sold
in the
United States
31o8
98.5
25.6
2.0
66.3
0.0
0.2
0,0
0.0
0.0
0.0

Total Currency Outside Banks and Bank Deposits
Excluding Government Deposits
(millions of Canadian dollars)

~~

Dec. 31, 1959
March 31, I960
June 30, I960
Sept. 30, I960
Oct. 26, I960
Nov. 30, I960
Dec. 21, I960
Source:

Currency

Deposits

Total

1,789
1,715
1,767
1,767
1,760
1,838
1,833

10.956
10,936
11,126
11,513
11,621
11,302
11,380

12,716
12,651
12,893
13,280
13,381
13,1U0
k3,213

Change

+
+
+
+

9U
2U2
387
101
2U1
73

Bank of Canada Statistical Summary.

General Bank Loans Seasonally Adjusted
(millions of Canadian dollars)

Total outstanding
- Aug.
- Feb.
March
June
Sept.
Oct.
Nov.
through Dec. 21




5,006
L.881
a,786
U,866
a,971
a,971
5,019
5,13a

Change from
previous period

- 235
+ 15
+ 80
+ 105
0
+ as
+115

CANADA
THREE-MONTH

- UNITED STATES

T R E A S U R Y BILL R A T E S

RATE DIFFERENTIAL A N D

FORWARD

CANADIAN

DOLLAR

>V

RATE DIFFERENTIAL W I T H

FORWARD




EXCHANGE- COVER

CANADA
SELECTED

STOCK

CHARTERED

BANK

ASSETS

BANK

DEPOSITS

-

LESS

FLOAT

MARKET




Million#

ol

Oollon