Full text of H.16 Capital Market Developments : June 10, 1960
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DECONTROLLED AFTER SIX MONTHS Not for Publication JUN 1,3 i960 FEDERAL r ' " f I A N X June 10, i960 H.lli HftPTTAT. MAPKira DEVELOPMENTS IN THE UNITED STATES AND CANADA (Including Quarterly Review of Corporate Security Financing in the United States and Monthly Review of Financial Developments in the United Kingdom) Part I - United States The volume of large public security financing for new capital is expected to be somewhat smaller this week for corporations and somewhat larger for State and local governments than in other recent weeks. Last week, ending June 10, large corporate issues with aggregate proceeds of $130 million and State and local government bonds totaling $58 million were sold. This week, one corporate bond.issue for $50 million and State and local government bond issues amounting to $126 million are expected to be sold. A Canadian provincial issue for $30 million is also scheduled for sale. Long-term bond yields - Yields declined last week for all categories of outstanding bonds, except those for high-grade State and local government bonds which remained stable. Yields for high-grade corporate and U. 5. Government obligations are currently at their low levels reached earlier this year3 those for State and local government and lower grade corporate bonds are still 7-10 basis points above their i960 lows. Short- and intermediate-tern interest rates - Money market rates also generally declined last week. The discount rate at the Federal Reserve Bank of New York was lowered on Thursday to 3-1/2 per cent. Yields on Treasury bills and intermediate-term issues continued to decline substantially with those for both 3- and 6-month bills reaching the lowest level this year. The rate for directly placed finance company paper, 3 to 6 months, also declined further as early last week the rate was changed from 3-3/b to 3-1/2 per cent. Stock prices - Standard and Poor?s index of stock prices increased substantially last week, closing at 57.97 on June 10. Prices, at the highest levels since mid-January, are currently ii per cent below the high reached in the first week this year and 8 per cent higher than the low recorded in early March. FNMA secondary market operations - Secondary operations of fNMA in May continued to reflect some further easing in mortgage market conditions. Offerings to and purchases by EMMA"were down again. The modest volume of FNMA sales was uie largest in k(j montns, and at $3.6 million exceeded the totalTfor all of last year. Coiporate Security Offerings in the First Quarter i960 Net proceeds for new capital - Corporate security offerings for new capital totaled $2.2 billion in the first quarter of 19 60, about the same as a year earlier, but one-third smaller than the very heavy volume sold in the first quarters of 1958 or 19^7. (Securities sold to refund outstanding issues were snail in volume—#82 million— but somewhat larger than a year earlier.) Although the total of net proceeds for new capital was little different from last year, offerings by manufacturing, electric, _gas and -water utilities, transportation and commercial and other companies were in substantially smaller volume. Issues sold by communications, financial and real estate and mining companies were larger. Financial and real estate companies offered securities with proceeds of $.6 billion, nearly one-half larger than a year earlier and the largest first quarter volume for these companies since 1956. The increase this year reflected a much larger number of moderate-sized ($L5-$50 million) issues sold by sales and consumer finance companies. New financing by electric, gas and water utilities, amounting to $.6 billion, was one-fourth smaller than in the first quarter of 1959. A further increase in internal funds, principally depreciation allowances, and substantially smaller net repayments of bank loans this year than in the first quarter of 1959, made it possible for these companies to finance about the same amount of plant and equipment expenditures with a smaller volume of long-term external financing. New issue volume by manufacturing companies was $.3 billion. This volume was one-tenth smaller than in the first quarter last year and the smallest volume of security sales by manufacturing companies since the first qua rter^of 195b. The amount of securities sold was moderate for all types of manufacturers. Industries selling a larger dollar volume of issues this year than last included electrical machinery, fabricated metal products and textiles and apparel; chemical and food manufacturers sold less than last year. Total gross proceeds - Gross proceeds from corporate offerings, which include refunding issues and costs of flotation were #2.3 billion in the first three months of i960, about the same as a year earlier. Publicly-offered issues totaled §1.1* billion, slightly less than in 1959, while private placements amdunted to nearly $.9 billion, slightly more. The volume of bond financing was nearly one-tenth larger this year than last. Stock financing was smaller with that for common stock issues being almost one-third smaller and preferred stock one-sixth smaller than a year earlier. Financing through convertible bonds R.lU Table 1 'Corporate Security Offerings for New Capital by Type of Business of Issuer First Quarter 1956-60 (Net proceeds in millions of dollars) Total corporate offerings Refunding New capital I960 1959^ 1958 1957 1956 2,233 2,232 3,273 3,1*93 2,209 82 2,151 28 2,201 13k 3,139 3,W Vl3 Manufacturing Electrical machinery Fabricated metal products Chemicals Textiles and apparel Nonelectrical machinery Stone, clay and glass products Foods Rubber products Other transportation equipment Motor vehicle and equipment Other 2/ 318 92 25 22 21 18 13 12 . 11 11 10 80 Electric, gas and water utilities 598 813 1,091 Communication 186 105 867 31 52 Railroad 17 33 6 19 y 3h h 7 1/ 213 , J? lB . 23 51j£ 1^297 h 67 6 58 Ik 3 1 k 15 299 51 21* 91 57 17 6 36 51* 920 106 2,102 606 13 2 18 68 53 ,2 lli 1*0 57 21*9 981 1*51 95 ' 112 85 428 ll*l Other transportation 118 239 90 90 1*9 Commercial and other 172 197 1*6 67 85 Mining 115 26 53 Financial and real estate Sales and consumer finance Other H29 " 185 20? 6lk jjU 209 382 2H0 lk2 83 387 m 179 r/ Revised. ' 1/ Less than #500,000. 2/ Includes small volume of issues of foreign manufacturers not further classified. Note.—Details may not add to totals due to rounding. Source.—Securities and Exchange Commission and Federal Reserve. 1*6 638 183 totaled $.1 billion, the smallest volume in recent first quarters, and accounted for 6 per cent of all bond issues. Table 2 Total Corporate Security Offerings by Type of Issue 1st Quarter 1956-60 (Gross proceeds in millions of dollars) Type of issue I960 1959^' 1958 1957 1956 Total corporate offerings 2,283 2,282 3,318 3,558 2,250 Type of offering Public Private 1,1*01 881 1,1*29 855 2,521 797 2,626 932 1,201. I,0li8 Type of security Bonds and notes Public Private 1,753 937 816 1,622 2,81*6 2,067 779 2,706 1,798 908 1,706 683 1,02k (Memo: Convertible) 787 835 (106) (135) (805) Preferred stock 100 11*2 182 98 191 Common stock i|29 518 289 753 352 (U69) r/ Revised Note.—Details may not add to totals due to rounding. Source.—Securities and Exchange Commission. More detailed information concerning recent capital market developments is presented in the attached exhibits. Developments in the Canadian capital markets are presented inJPart II at the end of this report. Capital Markets Section, Division of Research and Statistics, Board of Governors of the Federal Reserve System. (122) HIGH-GRADE LONG-TERM 4.5 ^v/ LOWER-GRADE X v y / A "r"' \j~ / j V V 7 / v y y j v _ 'A V V \ /• .J:. 1957 1958 R M I960. ii. la -7- Exhibit B - Tables for Exhibit A Long-term Bond Yields ... High-grade Date Corpora te Aaa 1/ U. S. Govt, long-term 2/ Spread between U. S. Govt, and Corporate IState and local Aaa State and local govt* Aas •Q (Per cent) 195U 1957 1958 1959 - Low High Low High Low I960 - High Low 2.85 it.Ht 3.55 £.61 L.09 3.76 (10/18) 3.07 V25) 4.37 (12/31) 3.83 (1/2) h.hh it.00 (6/10) May 13 May 20 May 27 June 3 June 10 2/ h.h$ k.k& h.hl L W l».13 l|.U2 (1/8) 1 It. 18 lf.16 It. 07 It. 00 .30 13.061 (3/26) ; 1:8 .30 .60 .22 .50 16 .1*6 .19 .3li .92 .53 .92 .62 3,32 3.37 3.38 3.38 3.38 .32' .28 .31 .a .a .81 .81 .78 .69 .62 2.16 (8/6) .17 Lower-grade Date Corporate Baa 1/ State and local govt. Baa y Spread between Aaa and Baa State and Corporate local govt. (Per cent) 1951 1957 1958 1959 , 1960 - Low High Low High Low - High Low May 13 May 20 May 27 June 3 June 10 2/ 3.W* (12/31) 2.93 (8/5) £ £ ! 8 S » 5 : 81 ® ' i 5.28 5.28 5.28 5.27 5.2U t s 5.36 (2/12) 5.17 (V8) t M 3.92 (3/26) l».lt6 (1/7) it. 22 ( V 7 ) It. 28 it. 32 It. 30 .52 1.27 .77 .'56 .83 .71 .96 1.21 '.98 .79 .97 .92 .83 .82 .81 .79 .80 I.92 g/ Prellnlnary. 1/ Weekly average of daily figures. A*iri«» tere of bonds Included ts 25-26 years, 2/ Weekly avenge of dully figures. The series Includes bonds due or callable In 10 years or more. S/ Thursday figures. Only general obligation bonds are Included, average tere Is 20 years. Note.—Highs and lows are for lwllvl*tal series and may be en different datee for different series. SHORT- AND INTERMEDIATE- TERM INTEREST RATES GOVERNMENT 3 - $ YEAR ISSUES rv"V r k ^ v f i 3 - MONTH I I U S MARKET YIEIDS 1 s J S F I i MAIKI M lAJJV 1 " ]- / / 1 1 LLir1 R *• DISCOUNT RATE PRIVATE Weekly Per Exhibit D - Tables for Exhibit C -9- Short- and Intermediate-term Interest Rates Goveroment 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 13-5 yr. issues (per cent) Low High Low High Low 1960 - High Low 1.50 3.50 1.75 Loo 2.50 Loo 3.5o May 13 May 20 May 27 June 3 June 10 2/ Loo Loo Loo Loo 3.50 19514 1957 1958 1959 - Date .61 (6/11) 3.61 (10/18) . .. L 5 7 (12/26) 2.63 " (2/20) L59 (1/8) 3.02 1|.91 2.92 " " 5.07 3.32 3.50 3.29 2.9k 2.61 3.55 3.77 3.61* 3.18 2.80 2.61 (6/10) 2.80 Stock Exchange call loan 1/ 1.66 (V30) Lol* ( 1 0 A 6 ) 2.11* ( 6 / 7 ) 5 . 0 0 (12/21+) 3.70(1/2) L 9 7 (1/8) (6/10) L 0 2 ( 3 / 2 5 ) .26 .79 .19 .51 .16 .66 .86 .01* 1.1*2 .ItO 1.51 .38 L35 L5L Ll*8 L23 L12 .23 .27 .35 .21* .19 1.03 1.01 1.19 1.29 1.51 (12/26) (12/31) (1/2) (1/8) Spread between 3-month Prime Finance oompahy Treasury bill yield and rate 1/ finance company paper ]/ paper rates (per cent) 19 51* 1957 1958 1959 Low High Low High Low I960 - High Low 3.00 L5o 3.5b L75 3.75 5.50 5.00 3.00 L50 3.50 5.00 Loo 5.oo 5.00 1.25 3.88 1.13 L88 3.00 5.13 3.50 0 .59 -.35 .86 .13 1.02 .22 May 13 May 20 May 27 June 3 June 10 2/ 5.oo 5.oo 5.oo 5.oo 5.oo 5.oo 5.oo 5.oo 5.oo 5.oo 3.88 3.88 3.88 3.83 3.53 .59 .89 .92 » - (12/18) (7A9) (8/29) (10/9) (12/U) (3/25) (Vl5) 1/ Weekly rate shown le that In effect at end of period. Discount rate la for federal Reserve Bank of Mew York. Stock exoluuige call loan rate la going rate on oall loan* secured ty customers' atoek exchange collateral at New York City banks. Prime rate la that charged by large banks on .short-term loans to bualneoa borrowers of the highest oredlt standing. Market yield; weekly averages computed from dally closing bid prises. Series of 3-S year Issues oflnalstw of y seleoted notes and bond-i. y Average of dally rates published ty flnanos companies for dlrsotly placed paper for varying maturities In the 90-179 day range. Hot*.—Highs and lows are for Individual series and may be on different datee for different series. Fbr spreads, n*gn refers to widest, and low to narrowest. STOCK MARKET FEDERAL NATIONAL SECONDARY MARKET MORTGAGE OPERATIONS ASSOCIATION —11* Exhibit F - Tables l'or ExliiblL E Stock Market Stock price index 1/ 1957-59 - High Low I960 - High Low 60.51 39.78 59.50 5k.2k April May May 27 June 3 June 10 e/ 55.73 55.22 55.7U 56.23 57.97 Common stock yields 2/ (per cent) (7/31/59) (12/27/57) (1/8) (3/11) Stock maricet customer credit Trading Bank Customers1 volume J/ Total debit bal- loans to (millions ances U/ "others" 5/ of shares) (Millions of dollars) 3.07 it. 66 3.18 3.51 it. 3 l.U 3.9 2.it 3,it01 it,76it 2,482 3,55it it,365 * 3,198 3,028 it,153 1,373 1,060 1,167 1,111 3.a 3.U2 3.U0 3.37 3.33 2.9 3.3 3.2 3.6 3.5 it,153 n.a. n.a. n.a. n.a. 1,116 1,111 1,111 1,108 n.a. 3,037 n.a. n.a. n.a. n.a. n.a.<—Not available, g/ Preliminary. 1/ Standard and Poor's rrmposlte Index of 500 common stocks, weekly closing prices, 1941-43=10, Monthly data are averages of daily figures rather than of F M days' 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 prices by Federal Reserve. Yields shown are for dates on which price index reached its high or low. 3/ Averages of daily trading volume on the New York Stock Ebcoliange. 4/ Ehd of month figures for member firms of the New York Stook Exchai^e which carry margin accounts, excludes balances secured by U. S. Government obligations, 6/ Wednesday figures for weekly reportiiy 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 tanks account for about 70 per oent of loan# to others. For further detail ses Bulletin. Federal National Mortgage Association Secondaiy Market Operations 1/ Date Eatimated Offerings to FNMA Standby Immediate Total purcliase commitment Purchases by FNMA Sales by FNMA (Millions of dollars) 1959 - May June July Aug. Sept. Oct. Nov. Dec. 1960 - Jan. Feb. Mar. Apr. May g/ 80.6 8l.it 109.5 123.1 114.3 108.3 105.6 116.3 137.6 135.8 133.2 103.1 98.5 73.it 76.6 92.5 109.9 13b. 8 101.8 100.3 111. I 128.3 128.9 12U.6 96.1 93.8 7.2 7.8 17.1 6.5 5.3 U.9 y 8.6 7.3 it. 7 38.3 li9.it 62.3 71.7 05.it 165.5 1.1 .6 .3 .3 92.6 92.2 86.1 116.7 135.0 102.6 91.9 3.6 •—Leso thmn >50,000. . .j exclusive of premiums, 1/ Dxta represent unp-ld principal bnlnnc*. of the mcrtRftr.ns involved, nemunta of or app applications durlnr. the period fran discounts, or other ohnrgeo. Offerings are, neiounte '" """ received """" » Immediate purohane contract covers erl ntinp, mortp.n,;«i tract relates to proponed mortRHpioo, i Include thooe under both Immediate purohase and standby u.iuolly deliver within one yei-r. Pui-ehft.ien — conwlteimit contract,. Bat* crclude PUMA activity under Special Assistance and Management and Liquidating Programs. Exhibit 0 Long-term Corporate and State and Local Government Security Offerings and Placements (In millions of dollars) I960 January February March April May 577 715 860 e/725 J/650 a/1,0SO July August September quarter quarter quarter quarter 1st half Three quarters Year New capital 1958 1960 State and local W I 1959 r/1 728 821 738 646 1JS2/ 736 620 fi/556 639 858 646 812 953 511 89b 785 88?, 1,140 597 887 e/725 e/550 e/800 932 593 1,006 798 895 551 535 740 703 1,107 540 -i,u4 879 ' 864 900 862 518 920 2,151 e/2,li25 2,20k 2,567 1,979 2,642 3,139 2,623 2,760 2,300 3/U.576 4,771 6,750 9,392 October November December 1st 2nd 3rd 4th Corporate 1/ 1959 10,823 s I e/1,912 2,It) 806 403 651 456 474 435 3/2,075 l1,571 is 2,276 2,214 1,860 1,365 e/3,987 4,674 6,222 7,793 76:$ 4,520 Excluding finance companies h/ 1st 2nd 3rd 4th quarter quarter quarter quarter 1,722 |/2,125 Year e/ 1/ 2/ 3/ U/ 1,999 2,412 1,716 2,503 2,899 2,586 2,731 2,213 8,630 10,429 Estimated. g/ Preliminary. r/ Revised. Securities and Exchange Commission estimates of net proceeds. Investment Bankers Association of America estimates of principal amounts. Includes $718.3 million AT&T convertible debenture issue. Total new capital issues excluding offerings of sales and consumer finance companies. h.lh Exi libit H Other Security Offerings 1/ (In millions of dollars) Long-term Federal agency 3/ Foreign government 2/ I960 1958 1958 I960 I 1 1959 1 1959 1 / January February March 2 75 70 April May June 81 60 2 196 53 • 58 50 1*2 139 198 120 182 150 150 199 . 523 85 1 35 > October November December 33 30 70 58 123 7li 66 517 992 707 161* 9 5 17 .98 150 — 220 Short-term State and local government lx/ January February March — — . July August September Year 1,163 251 175 — 2,321 Federal apency 3/ 268 3l*5 365 190 U28 295 233 1*60 273 479 1*63 512 359 500 1*89 371 208 m* .'365 267 563 1*11 215 357 351* 26H 509 2*86 675 289 209 161 329 July Aufust September 2li6 167 399 289 123 369 727 365 665 1*37 206 330 October November December 235 31*3 358 ?31 H 5 21*3 733 1*71 288 liU 137 It,179 3,910 6,0),7 3,098 April May June Year 1I5U fiZ Preliminary. 1/ Data presented In this exhibit differ from thosi In Exhibit E In that refunding ls-tuns, an well as n«sw capital laauea, ere .Included, Long-term securities ai*a defined as those irativAny in mare thar. oua yuan. 2/ Inoludos lecurlties offered In tho United States by foreign goverrsionts and thair cubdi visions andby international organisations. "ourtii: Securlilea and Kxuhrvag# Commission. 3/ Isauts not guararrlt id by the U. S, Oovvrniir.'.. Sourasi lony-terre, Securities and Bto'nangt Cor.nl ail on | short-terin, Federal Reserve, 4/ Principally tax and bond anticipation notos, warrants or certificates ar.d Public Housing Authorl'.y no t»ii« In some instances PHI Mtes Included nay hive a gome what longer teis than ens year. Source t Bond Buyer. Exhibit I -ill- Large Long-term Public Security Issues for New Capital (Other than U. S. Treasury) 1/ Proceeds of Large Issues Offered (Millions of dollars) Month . Corporate 1959 - May June July August September October November December i960 - January February March April May State and local government Other 2 / 258 635 19h 263 2lh 29h 163 217 388 283 225 370 23h 3h2 28k 110 363 199 100 h21 230 279 262 382t 309 139 50 60 50 98 175 20 70 100 320 191 71 28 Large Individual Issues Offered June 1 through 10 Issuer Type 3/ Amount Coupon (millions rate or Offering Maturity net inter- yield Rating of dollars) est cost CORPORATE "Florida Lt. & Pwr. Co. Mich. Wise. P. L. Co. So. Elec. Generating Co. Natl. Cash Register Co. Northwestern Bell Tel. Co. Midwestern Gas Transm. Co. Baltimore Gas & Elec. Co. Com. stk. 1st mtg.p.l.bds. 1st mtg. bds. S.F. deb. Deb. 1st mtg. bds. 1st ref.mtg.bds. 23.1 30.0 1*0.0 1*0.0 1*5.0 60.0 25.0 1980 1992 1985 1998 1980 1980 5-7/8 5-l/L li-3/li 1-7/8 W A 4-7/8 5.70 5.20 It. 75 1*.80 5.70 L75 Baa A A Aaa — Aaa STATE AND LOCAL GOVERNMENT King Co. Sch. Dist. #1, Washington Memphis, Tennessee Penna. Gen. State Auth. Los Angeles Dept. of Wtr. and Pwr., California 10.0 G.O. G.O. Rev.-Rent. 17.7 25.0 1962-80/70 3.67 1961-90 3.33 1963-87/70 3.61 2.75-3.75,/A 2.25-3.50^ Aa 2.8O-3.7O — Rev.-Ut. 15.0 1961-90/65 2.1*0-3.75 3.' Aa Large Individual Issues Offered June 1 through 10 (Cont'd) Issuer Type y Coupon Amount rate or Offering (millions Maturity net interyield of dollars) est cost Rating OTHER None and local government security offerings of #10 million and over. 2/ Includes foreign government and International Bank for Reconstruction and Development issues and non-guaranteed issues by Federal agencies. 2/ In the case of State and local government securities, G.O. denotes general obligations j Rev.-Ut., revenue obligations secured only by income from public utilitiesj Rev. -Q.Ut., revenue bonds secured only by revenue from quasi-utilities; Rev.-S.T., revenue bonds secured by revenue from specific taxes only; Rev.-Rent., revenue bends secured solely by lease payments. " hj 1/4 per cent bonds of 1989 and 1/10 per cent bonds of 1990 not reoffered. -16- 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 Subsequent to date shown During month following date shown 0ther Corporate 287 165 238 198 37k 385 226 210 20? 301 299 202 W 1959 - May 29 June 30 July 31 Aug. 31 Sept. 30 Oct. 30 Nov. 30 Dec. 31 1960 - Jan. 29 Feb. 29 Mar. 31 Apr. 29 May 31 21*7 12*6 356 385 270 115 295 2*2*5 210 255 250 2U3 277 1/ Corporate I |?™ w a\\ ™^ > h e r 2 / 761500 1*06 102 2*70 336 2*85 51*5 310 . 385 280 258 502 332 272 305 517 692* 509 271 280 252 372 32*2* 35? 553 . 50 25 70 30 2*5 35 30 Forthcoming Large Offerings, as of June 10 Issuer Type 50 25 70 30 2*5 35 60 ( Amount Approximate date (millions of offering of dollars) CORPORATE Consolidated Edison Co. of N. Y. James Talcott Inc. Gulf States Utilities Co. Tampa Electric Co. Montgomery Ward Credit Corp. Illinois Bell Telephone Co. 1st ref.mtg.bds. Senior notes 1st mtg. bds. 1st mtg. bds. Deb. Com. stk. ^Commercial Credit Co. Mississippi River fhel Co, Northern Illinois Gas Co, Texas Eastern Transmission Corp. Commerce Oil Refining Corp. " Senior notes S.F. deb. 1st mtg. bds. Deb. Deb., bds. & com. June 15 June 23 June 28 June 29 June 29 June 30 (rights expire) July 6 50.0 July 8 22*. 0 July 12* 30.0 Indefinite 25.0 Indefinite 2*5.0 5o.o 20.0 17.0 25.0 50.0 61.0 STATE AND LOCAL GOVERNMENT State of Kentucky State of Michigan Milwaukee, Wisconsin Philadelphia Sch. Diet., Pa. Commonwealth of Puerto Rico Digitized*State for FRASER of Connecticut G.O. Rev.-S.T. Rev. -Ut. G.O. G.O. G.O. 30.0 25.0 15.0 10.0 17.0 28.9 June June June June June June 12* 11* 12* 12* 15 16 H.lli -17- J-2 Forthcoming Large Offerings, as of June 10 (Cont'd) Issuer Type Amount Approximate date (millions of offering of dollars) STATE AND LOCAL GOVERNMENT (Cont'd) Oroville-Wyandotte Irr. Cist., Calif. estate of Maryland Alabama Education Authority State of Ohio New York State Power Authority Maryland State Roads Commission State of California Florida Development Comm. ^State of North Carolina Santa Clara Co., California Carmen-Smith %dro-Elec. Proj., Ore, Chesapeake Bay Bridge Tunnel Comm. Rev.-Ut. G.O. Rev.-S.T. G.O. Rev.-Ut. Rev.-Ut. G.O. Rev.—Ut. G.O. G.O. Rev.-Ut. Rev.-Ut. 62.0 13.5 50.0 15.0 100.0 20.0 93.0 16.8 10.7 11.5 25.0 200.0 June 21 June 21 June 21 June 21 June 21 June 22 June 28 June 29 July 6 July 12 July 19 Indefinite S.F. deb. Bds. & stk. 30.0 30.0 June 16 Indefinite OTHER Alberta Municipal Finance Corp. Liberian Iron Ore Ltd. Included in table for first time. 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. 3/ Exhibit K -18- Yields on New and Outstanding Electric Power Bonds, Rated Aa and A 1/ Date 1952-1959 High Low 1959 - July Aug. Sept. Oct. Nov. Dec. 1960 - Jan. 7 Feb. 25 26 Mar. 15 Aa-rated offering yields A-rated offering yields Amount above Amount above Actual Actual seasoned yields seasoned yields (per cent) (per cent) (basis points) (basis points) 5.30 (12/8/59) 2.93 (3/31/510 *4.93 it. 83 . 31 23 5.13^/ *5.08 *5.30 63 5.08 5.10 16 18 29 Apr. 6 8 11* 21 27 May 10 12 25 87 -3 6 5.65 (9A8/59) 3.00 (3/17/51*) 123 -15 5.07 17 *5.65 5.33 60 1*3 S.J&- 51 28 8 32 17 I1.8S 33 h.9h 39 k.95 U.88 39 32 5.00 1*.93 11 h.98 21 5.30 50 5.10 26 33 5.20 7 Single observation, not an average. 1/ Covers only 30-year first mortgage bonds, as reported in Moody's Bond Survey. Except where indicated, the actual yield figure and the amount above seasoned yields are averages of offerings during the indicated period and of the differences between these new offering yields and yields on seasoned issues of similar quality for the same day. Average maturity for the seasoned issues varies from 26 to 28 years. 2/ Provides for a 5-year period during which issue may not be called for refunding at a lower coupon rate. Monthly averages so marked include one or more issues with such a provision. Other issues have no such provision. June 13, I960 -19Part II - Canada There was a general easing of rates in Canadian money markets last week in sympathy with trends in United States markets. Canadian Treasury bill and bond yields touched new lows for the year. There was only a small net incentive to hold the 3-month Canadian bill. In the bond market, the spread in favor of the Canadian bonds widened during the week. Stock prices showed some rise over the week but remained relatively low for the year. General bank loans continue to expand more than seasonally. There was little change in the price of the Canadian dollar during the week. Money market conditions. At last Thursday's auction the 3-month Treasury bill declined by 27 basis points from 2.92 per cent a week ago to 2.63 per cent, a low for the year. The 6-month bill also declined to a low for the year, by 35 basis points, from 3.2U per cent to 2.89 per cent (see Table). Last week the chartered banks decreased their bill holding by $9 million while the general public holdings increased by an equivalent amount; in the preceding four weeks, the chartered banks were heavy purchasers of bills and the general public heavy sellers (see Table). The average closing rate on day-to-day loans increased to 2.95 per cent from 2.60 per cent the previous week. For the first time since the end of April the yield on the Canadian 3-month bill was above the rate for the United States bill. Because the premium on the 3-month forward Canadian dollar declined, the net incentive in favor of the Canadian bill, fell from 0.31 per cent per annum to 0.20 per cent (see-Table). Bond market conditions. Bond yields generally declined during the week, many to the lowest levels for the year. The spread between selected comparable Canadian and United States securities (Thursday yields for bills and Wednesday yields for bonds) was as follows (figures in parenthesis refer to the previous week): 0.02 0.06 0.1*2 0.98 1,37 per per per per per cent cent cent cent cent on on on on on a 91-day bill (0.00) a 182-day bill (0.09) an 8-year bond (0^21) a 20-year bond (0.92) a 35-year bond (1.31) There was little change in bond holdings during the week. The Bank of Canada showed no net change and the chartered banks increased holdings by $5 million while the general public decreased by $10 million including savings bonds (see Table). Maaitoba issued a $5 million 20-year 3 per cent bond priced at 71-lA to yield about 5.35 per cent. In the corporate sector, Alberta Gas Trunk Line Co. has announced its intentions to offer $110 million of securities ($65 million in the United States and $U5 million in Canada) in the latter part of the year. The funds are to be used for constructing pipe lines when U.S. distributors are given permission to import Alberta gas. It is hoped that construction can begin this year and be completed before 1962. Chartered bank loans. On a seasonally adjusted basis, general bank loans rose by $1*7 million in May compared with increases of $ll* million in April and $15 million in March. During the month, the banks bought #78 million of Treasury bills and §9 million of bonds. Their liquid asset ratio rose from 16.7 per cent on April 27 to 18.2 per cent on June 1. Exchange rate. There is little change in the spot rate on the Canadian dollar for the week before. The Canadian dollar closed at 101.88 last Thursday. The 3-month forward rate continued to show a slight premium for the sixth straight week (see Table). Stock market conditions. During the last week the industrial indices on both the Toronto and Montreal exchanges increased, and for the first time since mid-April the Toronto index reached 501. Both indices continued to be well below their midpoint for the year as noted in the following table: New York Toronto . Montreal Standard and Poor I960 - high Low June 1 2 3 6 7 8 532.9k 1*81*. 60 496.75 1*98.31 199.06 1*99.00 500.63 501.25 320.0 277.9 28^.1 285.8 286.7 285.1 285.9 285.9 British Commonwealth Section Division of International Finance Board of Governors of the Federal Reserve System 65.02 57.00 59.57 59.86 59.97 60.70 61.31* 61.83 Selected Canadian Money Market and Related Data 3-mo. Treas. bills Spread Canada U.S */ over U.S. Canadian dollar Spot 3-mo. discount (-1 forward premium (+)<y 1959 - High Low 1960 - High Low 6.16 3.25 5.1b 2.65 b.b9 2.80 1.63 2.63 2.96 0.30 0.90 -0.69 105.51 102.58 105.27 •101.31 May 19 26 June 2 9 2.99 3.01 2.92 2.65 3.U2 3.26 2.92 2.63 -0.U3 -0.25 101.U7 101.31 101.9b 101.88 0.02 ~ 101.55 101.3b 102.02 101.92 Net incentive to hold Can, bill®/ 0.31 -Q.72 0.b8 -0.57 0.31 0.12 0.31 0.18 -0.12 -0.13 0.31 0.20 a/ Average yield at weekly tender on Thursday. "b/ Conposite market yield for the U.S. Treasury bill on Thursday close of business, c/ Di U.S. cents. d/ Spread between spot rate and 3-month forward Canadian dollar on Thursday closing, expressed as per cent per annum. e/ Spread over U.S. Treasury bill (column 3)> plus 3-month forward discount or premium (column 6). Selected Government of Canada Security Yields 6-mo. Treas. bills Spread Canada uTi/ 1959 - High Low 1960 - High Low 6.2b 5.11 5.33 2.89 May 19 26 June 2 9 3.2b 2.89 3.22 3.26 ol85 Intermediate bonds (8 yr.) Spread over Canada u.s.fy 5.37 b.50 -0.69 b.b9 5.55 l.ii 0.21 -0.b8 -0.29 0.09 0.06 b.67 b.65 b.b9 b.5b 0.31 0.2b 0.21 0.b2 J Long-term bonds 135 year) Spread Spread Canada over Canada U.S j Z (20 year) . 5.30 b.bb 5.b2 b.96 5.08 5.06 5.02 b.96 1.22 0.87 5.05 b.73 5.28 5.05 0.87 0.88 0.92 0.98 5.12 5.1b 5.09 • 5.05 Average yield at weekly tender on Thursday. Spread between Canadian auction rate and conposite market yield of U.S. on close of business Thursday. c/ Government of Canada 2 - 3 A per cent of June 1967-68. cy Spread over U.S. Government 2-1/2 per cent of 1963-68. e/ Government of Canada 3 - l A per cent of October 1879* "if Spread over U.S. Government 3-1/L per cent of 1978-83. g/ Government of Canada 3-3/1* per cent of September 1996 - March 1998. n/ Spread over U.S. Government of 1995. sk 1.61 0.98 1.29 1.30 1.31 1.37 Canada: Changes in Distribution of Holdings of Canadian Government Direct and Guaranteed Securities (millions of Canadian dollars, par value) Bank of Canada Treas. Bonds bms. April 6 13 20 27 May h 11 18 25 June 2 . 9 + + + + - 28 37 1h 10 9 3 15 0 - 5U - l - 30 0 0 + 7 + Hi 0 + k - U - Ii8 0 Government Total - 3 - 11 + 3 + 2 + 1 * 2 8 - 3 - 2 - 9 Chartered banks Treas. Bonds bills + + + + + + - 10 33 h 7 17 Hi 7 Uo 32 9 .+ 9 + 3 + 2 - 18 - 7 - 2 + 17 + 1 + 8 + 5 Source: Bank of Canada, Weekly financial Statistics, General public Savings Treas. Bonds bills bonds . - 6 7 5 8 7 8 7 7 7 7 + + + 19 Hi 11 3 26 26 6 39 h 9 + 38 - 10 - 5 + 7 - 8 0 - 15 + 5 + 73 - 3 "rt y 14 • Sales of New Government, Municipal, and Corporate Bonds (millions of Canadian dollars) I960 to June 6 Government (direct) Government (guaranteed) Provincial (direct) Provincial (guaranteed) Municipal Corporation Less short terra 1959 ' to June 8 1958 to June 9 ll|2.5 153,8 282.U 305.6 • 3,1U5.0 150.0 111.0 1U3.8 170.6 167.1 U,273.U 2,760.0 1,513.U 3,887.5 2.9U5.0 9U2.5 3,625.-0 300.0 195.0 178.7 205.5 505.li 5,009.6 2,675.0 2,331.6 3,389.0 i '§ Of the above, the following amounts have been sold in the United States Provincial (direct) Provincial (guaranteed) Municipal Corporation 25.0 22.0 110.7 75.0 56.2 ii.6 2U.0 100.0 70.0 67.2 102.1 208.0 159.8 339.3 JOjJ Source: Weekly Bond Sales Summary* A. £. Ames & Co., Ltd. i i June 13 I960 Appendix 1 0, -o- United Kingdom: Money and Capital Markets During May Bates in money and capital markets in Britain showed little change during May but conditions in the gilt-edged market deteriorated in early June. Several developments disturbed the bond market. On June 1, an economic assessment published by a well-known academic research staff concluded that Britain's economic situation has changed for the worse-and recommended that the authorities let gilt-edged prices fall "in so far as this is necessary to make monetary policy effectiveoH Secondly, external developments — weakness in the sterling rate, a larger impart deficit in April and "unexciting" gold and dollar figures for May — added to uncertainties about the outlook for gilt-edged prices. The spot pound declined from $2,809 on April 29 to $2,802 on June 3. Outside financial markets, the upward drift in interest rates continued during May. The increased attractiveness of Treasury nbnm&rketable securities introduced in the 1960-61 budget on April U (see "Capital Market Developments for March," dated April 18, i960) led the building societies as a group to introduce higher yields to their investors and higher rates on their new and outstanding mortgages. In addition, the Treasury-sponsored Agricultural Mortgage Corporation also raised its lending rate. Money market conditions. The 3-month Treasury bill rate declined from U.6? per cent to U.56 per cent on May 6 and remained unchanged through the June 3 tender (see Table). The spread favoring the London bill over the United States bill remained wide through the month. After narrowing early in the month, the spread increased to 1.91 per cent on June 3 compared with 1.63 per cent. on May 6. The discount on the 3-month forward sterling changed little during May. The net incentive to hold the United Kingdom bill fell sharply on May 13 to only 0.L2 per cent, hut reached 1.21 per cent (annual basis) on June 3 (see Table). Gilt-edged market. Gilt-edged yields fluctuated within narrow limits during May, with yields slightly higher in the first week of June. The changes in yields on selected maturities between May 6 and June 3 were (the figures in parenthesis refer to April changes): -0 oil per 0.18 per 0.07 per 0.20 per cent cent cent cent on on on on a 91-day bill (0»05>) a 6-year bond (-0.03) a l^pyear bond (0.03) an undated bond (-0.0U) The higher yields on June 3 resulted from a fall in security prices following the suggestion in this June issue of the London and Cambridge Economic Service that additional monetary restrictions may be needed to curb inflationary pressures. Some uneasiness about the pound in the exchange market added to market concern about the outlook for gilt-edged prices. Activity in gilt-edged was at a reduced level over the past month and on Tuesday, June 7 the bond price index reached a I960 low of 81.5 compared with 8£.U at the end of last year. ' —2li— —-— Installment credit controls. The effectiveness of the recently established installment credit restriction is difficult to estimate at this early date. The press reports that the hire-purchase controls appear to have had little effect on the demand for most durable consumer items subject to these new regulations. For many of these items, such as automobiles, a several-month lag between orders and deliveries continued to exist. According to trade estimate? the decline in contracts on automobiles in May were only about £<>6 per cent below the number of contracts registered in May 1959. Thus far, cancellations have not been unusual. For some smaller items, such as radios and television sets, consumers appear to be ready to meet the new requirements without any noticable decline in demand. Total installment credit debt rose in April by £29 million compared with increases of £31 million in Mapch and £16 million in February. Credit outstanding totaled £9k9 million at the end on April compared with £6U2 million at the end of April 1959. Stock prices. Stock prices fluctuated widely during the period under review. After reaching a I960 low of 295.8 on May 9, the Financial Times industrial index rose to a peak of 322.2 on May 31 (see Table). On June 1, however, the index dropped to 318.1 but by June 8 ' recovered to 322.3. During the month, the gap in yields between stocks and bonds widened as the Consols yield rose and the share yield declined with rising stock prices (see Table). The gap in favor of bonds reached a minimum of 6.73 per cent on May 6 but had widened to 1.23 per cent on June 3. Mortgage loans. The national organization of building societies announced an increase in mortgage rates from 5-1/2 per cent to 6 per cent effective immediately for new borrowers and after a three months delay for existing borrowers. Savings invested in building society shares will receive 3-1/2 per cent beginning July 1 as against 3 - 1 A per cent at present, but interest on deposits will remain at 3 per cent. These new rates affect all members of the Building Society Association. The Halifax Board, one of the largest nonmembers, has not yet announced a change but is expected to do so soon because of growing difficulties of the building societies in maintaining their inflow of new funds to meet their mortgage demands. National Savings Movement <> Receipts by the National Savings Movement exceeded repayments by £53*25 million during the first nine weeks of the current fiscal year as compared with £55*838 million during the same period last year. However, after accounting for an early Easter, the current year rate of saving exceeds that of the record year in 1959. British Commonwealth Section Division of International Finance Board of Governors of the Federal Reserve System -25Unlted Kingdom: Treasury Bill Yields and Exchange Rates Date 3-mo. Treasury-bill Discount y . Differ^ on 3-mo. , U.Kjy U.S^S/ ence sterling^/ 3.6 3.0 U.62 3.75 t.7 2.6 U.59 2.65 -1.1 O.U 1.9k -0.8U (P).6U .92 April 29 May 6 U.65 U.67 L.56 U.56 U.56 U.56 3.0U 3.0U 3.a 3.25 3.09 2.65 1.61 1.63 1.12 1.31 1.U7 1.91 .87 .80 .70 .70 .68 .70 June 3 Exchange rate Spot Discount sterling on 3-mo. . __ 1959 - High Low I960 - High Low 13 20 27 Net incentive to hold . U.K. billS/ „„ 1.30 - .23 281.17 279.83 (P).U7 .65 .7k .83 .1*2 .61 .79 1.21 280.91 280.8U 280.71 280.53 280.32 280.20 .61 .56 •U9 .19 •U8 .U9 . Average yield at Friday weekly tender. Closing market yield for Friday in New York. T%/c/ Spread between spot and forward rate in per cent per annum. cy Net of difference in bill yield less discount on 3-month sterling, e/ Spot rate in New York market in U.S. cents. • I/ Spread between spot and forward rates in U.S. cents. United Kingdom: Selected Capital Market Yields 6-year bond£/ 15-year bondjy War loang/ I960 - High Low 5.53 U.93 5.75 5.33 5.73 5.53 April 29 >lay 6 13 20 27 June 3 5.52 5.35 5.35 5.U2 5.39 5.53 5.75 5.65 5.59 5.6U 5.62 5.72 5.70 5.58 5.59 5.62 5.62 5.69 Consols 3/ , Share yield®/ as Share . pricesfi/ 5.U0 5.03 U.17 3i7U 1.36 0.76 333 297 5.35 5.26 5.28 5.35 5.33 5.46 U.28 U.53 U.UO U.36 li.23 U.23 1.07 0.73 0.88 0.99 1.10 1.23 305 297 307.U 309.9 319.7 319.7 a/ 5-1/2 per cent Exchequer, 1966. 2/ 3 per cent Savings Bond 1965-75* c/ 3-1/2 per cent War Loan (undated). 2/ 2-1/2 per cent Consol (undated). e/ Financial Times. 7/ Difference between yield on 2-1/2 per cent Consols and share yield, j/ Financial Times.