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 3»£U 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