Full text of H.16 Capital Market Developments : March 9, 1959
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Not for Publication DECONTROLLED AFTER SIX MO H.lii March 9, 1959. CAPITAL MARKET DEVELOPMENTS (Including Review of Corporate Security Financing in 1958) The volume of new public security financing was small during the week ending March 6, but is expected to be much larger this week. Large State and local government bond issues sold last week totaled $81 million; no large corporate issues were offered. This week, corporations are expected to offer large issues, including expiration of, subscription rights, with aggregate proceeds of $103 million. State and local government issues amounting to $153 million are also scheduled for sale. Bond yields - Yields declined last week for all types of outstanding bonds. The decline was slight for yields on corporate and U. S. Government obligations, but substantial for those on State and local government bonds. State and local government bond yields are now back to their mid-August 1958 levels. Stock prices - Stock prices and trading activity increased somewhat last week. Standard and Poor's index of 500 common stocks closed at 56.21 on March 6, declining from a peak of 56.^3 reached on Thursday. The volume of trading averaged i|.2 million shares a day. Corporate Security Offerings in 1958 Net proceeds for new capital - Corporations sold $2.3 billion of security issues to obtain new capital in the fourth quarter of 1958, bringing the total for the year to $10.8 billion. This volume for 1958 was one-eighth less than the record volume sold in 1957, but slightly above the total of new issues sold in 1956. Most major groups of issuers sold a smaller volume of offerings in 1958 than a year earlier. New issue volume by financial and real estate companies showed the largest percentage decline. Most of the decline is accounted for by the smaller volume of financing by sales and consumer finance companies, -whose financing was particularly small in the last three quarters of 1958. Electric, gas and water utilities were the most important group of issuers, offering securities with proceeds of-$3*6 billion and accounting for one-third of all corporate offerings. This total was only 6 per cent below the volume in 1957 but kS per cent greater than new issues sold in 1956. The volume of securities sold by these utilities was unusually large in the first quarter of 1958 but was smaller in the other three quarters than a year earlier. H.ll*. - 2 - Table 1 Corporate Security Offerings for New Capital by Type of Business of Issuer 19^-1958 (Net proceeds in millions of dollars) 1958 1957 3,296 600 1+08 306 233 220 219 218 116 139 135 75 73 111 53 390 k,10h 876 313 517 689 214; 111 1*8 51 129 106 169 3I48 1* 1*9 io50 All corporate offerings Manufacturing Petroleum and refining Primary iron and steel Primary nonferrous metals Nonelectrical machinery Chemicals Paper Other transportation equipment Foods Electrical machinery Fabricated metal products Stone, clay and glass Motor vehicles and equipment Beverages Printing Other 2/ 1956 1955 1951 10,381* 8,821 7,1*90 3,336 U13 198 136 362 23k 298 9h 113 119 68 180 265 10 29 517 h m 100 313 107 168 163 119 95 91 195 93 60 1*16 17 30 1*27- 2%# 292 361* 11*5 252 21*7 125 30 101 72 35 66 102 16 18 179 Electric, gas and water utilities 3,598 3,821 2,1*71* 2,251* 2,675 Communication 1,29k 1,1*1*1 1,38k i,ol*5 .651 Railroad . 206 326 365 221 213 Other transportation 571 1*75 329 323 288 Commercial and other 61+2 309 281 382 362 Mining 2l*0 270 . 398 386 1*68 Financial and real estate Sales and consumer finance cos. Other ?1*1* 399 515 1,701 929 772 1,815 17125 690 1,812 1,227 585 788 332 1*57 ~~ 1/ Less than $500,000. 2/ Includes small volume of foreign issues not farther classified in the manxrfacturing group. Note.—Details may not add to totals due to rounding. Source.—Securities and Exchange Commission and Federal Reserve. - 3 - H.lii New financing by manufacturing companies totaled $3.3 billion, one-fifth smaller than in 1957 and slightly below the volume in 1956. Petroleum and refining companies sold the largest volume of securities, with more than fourth-fifths of the proceeds being accounted for by veiy large issues of over $150 million. New issues by primary iron and steel manufacturers, second largest in volume in 1958, were larger than in other recent years. New financing by transportation companies (other than railroads) and commercial and other companies was in larger volume than in 1957. The increased financing by commercial and other companies is largely accounted for by the $346 million debenture issue of Sears, Roebuck and Company sold in September 1958. New issues by railroads and mining companies showed a decline in 1958. New capital financing by communication utilities was also in smaller volume, in spite of increased financing by AT&T. Total gross proceeds - Gross proceeds from corpora!te offerings, which include refunding issues and costs of flotation, were $11.6 billion in 1958, one-tenth below the volume a year earlier. The bigger decline in the volume of net proceeds for new capital offerings than in total gross proceeds largely reflects the increased volume of refunding issues last year. These issues totaled $582 million in 1958 compared with $214 million in 1957, but were still substantially below the volume of refunding in 1954 and 1955. Table 2 Total Corporate Security Offerings by Type of Issue 195W958 1958 1 1957 1 1956 1 1955 1 195k Total corporate offerings 11,555 12,884 10,939 10,21*0 9,516 y s 6,763 3,477 If (Gross proceeds in millions of dollars) Type of issue 3,777 m 3,301 m 635 635 816 2,301 2,185 1,213 | Type of 'offering Public Private 8,959 3,925 Type of security Bonds and notes Public Private m 3,839 Preferred stock 551 Common stock 3,351 1,320 . ltll 2,516 Note.—Details may not add to totals due to rounding. Source.—Securities and Exchange Commission.. . 3,484 - h - Publicly-offered issues totaled 08.1 billion last year and private placements amounted to $3.5 billion. The proportionate share of each remained the same as in 1957> with public offerings accounting for 70 per cent of total offerings and private placements 30 per cent. Debt financing was in only slightly smaller volume in 1958 than a year earlier as the increase in bonds offered to the general public nearly offset the decline in privately-placed bond issues. Common stock issues were smaller in every quarter of 1958 than in the corresponding period of 1957, although there was some increase late in the year. Volume for the year as a whole was nearly one-half smaller than in 1957. There were no large stock offerings made in 1958, while three-issues of over $150 million were sold in 1957. Financing through preferred stock issues increased last year, but continued to be relatively small. The volume of convertible bond financing increased in 1958, totaling $L.l billion and accounted for one-eighth of all bond issues. More detailed information_conceming recent capital market developments is presented in the attached exhibits. Capital Markets Section, Division of Research and Statistics, Board of Governors of the Federal Reserve System. 4 - HIGH-GRADE BOND YIELDS A LOWER-GRADE BOND YIELDS /\ < Ex) 1.1 bit b H.lk Tables for Exhibit A High-grade bond Yields Date Spread between U. S. Govt, and Corporate State and Aaa local Aaa State and local govt. Aaa y U. S. Govt, long-term 2j Corporate Aaa 1/ (Per cent) 1954 - Low 1 9 # - High 1958 - High Low I ? # -High Low 2.85 (4/23) 4.14 (9/27) 4.13 (10/10) (5/2)\ 4.16 (1/30) 4.09 (1/9) Feb. Feb. Feb. Feb. Mar. LIS Lilt 4.14 ii.13 4.11 6 13 20 27 6 g/ 2.15 (0/6) 3.76 (10/18) 3.81 (12/26) 3.07 (L/25) 3.96 (1/16) 3.83 (1/2) 1.90 (9/2) 3.45 (8/29) 3.31 (9/11) 2.64 (5/1) 3.20 (2/5) 3.06 (3/5) .30 .60 .51 .22 .27 .16 .30 .47 .72 .34 .81 .65 3.20 .22 .22 .23 .23 .24 .73 .74 .78 .79 *81 3.93 3.92 3.91 3.90 3.87 3.18 3.13 3.H 3.06 Lower-grade Bond Yields Date Corporate Baa 1/ State and local govt. Baa J/ Spread between Aaa and Baa State and Corporate local govt. (Per cent) 1954 - Low 1957 - High 1958 - High - Low 1959 - High Lo* 3.44 5.10 4.96 4.51 4.90 4.85 Feb. Feb. Feb. Feb. Mar. 4.90 4.90 4.89 4.89 4.87 6 13 20 27 6 g/ (12/31) (11/29) (1/3) (7/11) (2/13) (1/9) 2.93 а. 51 б.34 3.64 4.13 3.95 4.13 4.11 4.05 4.03 3.95 (8/5) (8/29) (9/11) (5/D (2/5) (3/5) .52 1.27 1.28 .77 .77 .74 .96 1.21 1.11 .93 .98 .89 .75 .76 .75 .76 .76 .93 .93 .92 .92 .89 ' g/ Prelimina zy. 1/ Weekly average of daily figures Average term of bonds included is 25-26 years. 2/ Weekly average of daily figures The series includes bonds due or callable in 10 years or more. y Thursday figures. Only general obligation bonds are included5 average term is 20 years. Mote.—highs and lows are for individual series and may be on different dates for different series. STOCK MARKET Table for ExJ libit C Stock Market Stock price • index 1/ "Trading Conunon Stock market customer credit volume 2/ stock Bank Customers1 (millions yields 3/ Total debit bal- loans to of shares) (per cent) ances 4/ "others" 5/ (Millions of dollars) 1953 - High 1954 - High Low 1955 - High 1956 - High Low 1957 - High Low 1958 - High Low 1959 - High Low 26.5k (1/2) 22.95 (9/18) . 35.98 (12/31) 24.93 15.89 (12/9) 35.28 49.64 i ® : 43.22 49.08 8 ® 39.W (12/20) 5U.il (12/26) 56:21 54.37 E 2.5 0.9 3.7 1.4 4.6 1.5 3.1 .1.5 4.2 1.4 4.9 k'.l 3.0 5.38 6.25 4.32 5.82 4.08 4.4l 3.62 4.3U 3.91 4.72 3.30 4.58 3.24 3.34 2,455 2,055 3,436 2,405 4.030 3,537 4,047 3,914 4.031 3,576 4,488 3,554 n.a. n.a. 1,66 5 1,314 2,388 1,653 2,805 2,517 2,823 2,740 2,987 2,4 2 3,2f'l 2,487, n.a. n.a. 780 664 1,048 746 1,241 1,018 1,267 1,155 1,163 1,054 1,317 1,051 1,274 1,210 January 55.82 4.0 3.24 4,554 3,297 1,257 February 54.77 3.5 n.a. 3.32 1,274 Feb. 13 54.42 3.0 n.a. 3.35 1,259 Feb. 20 ' 55.52 3.28 3.7 n.a. 1,256 Feb. 27 55.41 4.1 n.a. 3.29 1,274 Mar. 6 p/ _SW1 —ILlS,.— n.a* , _1^L_ n.a.—Mot available. - p7 i ' -Preliminary. h. 1/ Standard and Poor's composite index of 500 common stocks, weekly closing prices, 1$41-43=10. Monthly data are averages of daily figures rather than of Fridays' only. Highs and lows are for Friday's data only. 2/ Averages of daily trading volume on the New York Stock Exchange. 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 hirrh or low. b/ End of month figures for member firms of the New York Stock Exchange which carry margin accounts- excludes balances secured by U. S. Government obligations. 5/ Wednesday figures for weekly reporting memler banks. Excludes loans for purchasing or carrying U. S. Government securities at banks in New York and Chicago. Weekly reporting banks account for about 70 per cent of loans to others. For further detail see Hulletin. Note.—Highs and lows are for individual series and may ce on different dates for different series. Exhibit E ti.ll* Long-term Corporate and State and Local Government Security Offerings and Placements (In millions of dollars) 19 59 New capital State and local 2/ Corporate 1/ 1 1958 1959 1 1958 1 1957 1 1957 i,*h/ 1,060 1,065 1,320 April May June 1,11a 600 881 July August September January February March 6/700 e/650 l/6$0 October November December 1st 2nd 3rd Uth quarter quarter quarter quarter e/2,000 1st half Three quarters Year 812 71*2 S " S . ; s 1,1*53 798 895 551 546 393 1,102 538 1,1 hh 1,003 921* 973 806 1*03 651 529 581* 1*31 858 1*73 91U 1,090 789 1,076 1*56 1*71* 1*35 : 698 633 698 0 3,135 2,622 2,781* 2,250 3,1*15 3,11*9 2,899 2,951* 5,757 8,5ia 10,791 6,591* 9,1*93 12, W 723 s g s e/650 . e/2,079 2,276 2,2W* 1,660 1,365 1,820 1,701* 1,5a 2>029 L520 3,521* 5,069 7,099 1% Excluding finance companies h/ 1st 2nd 3rd jtth quarter quarter quarter quarter a/1,800 Year 2,89 k 2,583 5:iS 10,391 3,237 2,889 2,582 2,810 11,518 1/ Securities and Exchange Commission estimates of net proceeds. 2/ Investment Bankers Association of America estimates of principal amounts. 3/ Includes $718.3 million AT&T convertible debenture issue. U/ Total new capital issues excluding offerings of sales and consumer finance companies. Exhibit F H.ll* - Other Security Offerings 1/ (In millions of dollars) Long-»t e m Foreign government 2/ Federal agency 37 "19^9 1958 "1959 1958 I l W W January February March 196 53 April May June 139 198 120 July August September 9 5 17 81* k9 30 *8 72 523 125 60 1*2 161* 7 30 October November December 58 123 71* 60 1 Year 992 507 215 Id 20 1*. Short-term State and local government 1*/ January February March 1,163 251 100 2,321 572 Federal agency 3/"* 638 233 1*60 273 326 1*55 11*7 April May 357 3 Sk 26k 205 337 153 209 161 329 336 1*69 July August September 289 1*23 369 272 272 252 1*37 206 330 221* October November"' December 415 21*3 303 9k k$9 1*51* 111* 137 3,910 3,271* E/189 Year 270 371 208 11*1* 3,098 1*30 505 501 370 512 1,238 255 116 5,543 e/ Estimated. g/ Preliminary. 1/ Data presented in this exhibit differ from those in Exhibit E in that refunding issues, as well as new capital issues, are included. Long-term securities are defined as those maturing in more than one year. 2/ Includes securities offered in the United States by foreign governments and their subdivisions and by international organizations. Source: Securities and Exchange Commission. 3/ Issues not guaranteed by the U. S. Government. Source: long-term, Securities and Exchange Commission; short-term, Federal Reserve. kf Principally tax and bond anticipation notes, warrants or certificates and Public Housing Authority notes. In some instances PtiA notes included may have a somewhat longer term than one year. Source: Bond Buyer. Exhibit G H.Ik' Large Long-term Public Security Issues for New Capital (Other than U. S. Treasury) 1/ Proceeds of Large Issues Offered (Millions of dollars) Corporate Month 1958 - February March April May State and local government 605 1,093 725 356 281 771 209 825 259 227 305 369 31*0 July August September October November December 1959 - January February 553 182 300 505 195 275 109 288 172 259 229 335 ^ 551 J Other 2/ 266 653 161* 86 1*1 18 209 100 79 75 35 Large Individual Issues Offered March 1 through 6 Issuer Type 3/ Amount Coupon (mill ions Maturity rate or Offering Rating net inter- yield of dollars) est cost CORPORATE None STATE AND LOCAL GOVERNMENT Detroit-Metro. Expressway Philadelphia, Pennsylvania Port of New York Auth. Rev.-S.T. G.o. Rev.-Ut. 25.0 25.5 30.0 1960-81* I960-89 1989/68 3-51* 3.27 3.68 1.90-3.65, , A 1.85-3.1*5^ A 3.63 A OTHER None n.a.—Not available. 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. ' y In the case of State and local government securities, G.O. denotes general obligationsj Rev.-Ut., revenue obligations secured only by income from public utilities; 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 bonds secured solely by lease payments. h/ 1987-89 maturities not reoffered. - Exhibit ti H.llf Forthcoming Large Long-tera Public Security Offerings for New Capital (Other than U. S. Treasury) 1/ Expected Proceeds from Forthcoming Large Issues Date of computation 1958 - Feb. 28 Mar. 31 Apr. 30 May 29 June 30 July 31 Aug. 29 Sept. 30 Oct. 31 Nov. 28 Dec. 31 1959 - Jan. 30 Feb. 27 Subsequent to During month following date shown date shown State and State and Other 2/ Corporate Other 2/ Corporate local govt. local govt. 1,123 555 356 266 768 161 785 113 20k 301 210 270 198 131* 298 1*93 177 225 . 55 2l|l 295 258 229 261 551 292 110 150 36 71 75 1*5 — 1,208 670 561 1*61* 1,018 381 911* 216 326 1*01 370 365 279 31*1 330 1*93 208 235 125 1*35 521* 675 663 ' 515 856 1*81 ** 110 150 36 71 75 1*5 Forthcoming Large Offerings, as of March 6 Type Amount Approximate date (millions of oifering of dollars) CORPORATE Northern Indiana Public Service Co. KLM Royal Dutch Airlines American Natural Gas Co. Colorado Interstate Gas Co. Texas Eastern Trans. Corp. Cleveland Electric Illuminating Co. Ohio Edison Co. Ohio Power Co.. Monongahela Power Co. *Food Fair Stores, Inc. •^Columbia Gas System, Inc. Montana Power Co. Commerce Oil Refining Corp. 1st mtg. bds. Conv. sub . deb Common stk. 1st mtg. p. 1. bds. Pfd. stk. 1st mtg. bds. 1st mtg. bds. 1st mtg. bds. 1st mtg. bds. Conv. sub. deb. 25.0 17.0 28.0 33-0 15.0 25.0 30.0 25.0 16.0 21.8 Common stk. 2*0.0 1st mtg. bds. Deb., bds. & common 1*5.0 20.0 Mar. 11 Mar. 12 Mai-. 12 (rights expire) Mar. 12 Mar. 20 Mar. 25 Mar. 26 Mar. 31 Apr. 1 Apr. 10 (rights expire) Apr. 20 (rights expire) Spring Spring H.lli Forthcoming Large Offerings, as of March 6 (Cont'd) Issuer Type Amount Approximate date (millions of offering of dollars) STATE AND LOCAL GOVERNMENT New York, N. Y. Metro. Water Dist. of So. Calif. State of California Phoenix, Arizona ^Baltimore, Md. *State of Delaware Milwaukee, Wisconsin Pennsylvania General State Auth. *Los Angeles Sch. Dists., Calif. West Virginia University Buffalo, New York Chesapeake Bay Ferry Commission State of New Jersey Memphis, Tennessee G.O. Rev.-Ut. G.O. Rev.-Ut. G.O. G.O. G.O. Rev. G.O. Rev.-Rent. G.O. Rev.-Ut. G.O. G.O. 26.3 26.ii 100.0 10.0 28.9 12.5 18.8 30.0 27.0 10.2 10.2 lUi.O 25.0 10.0 Mar. 10 Mar. 10 Mar. 11 Mar. 17 Mar. 17 Mar. 18 Mar. 31 Mar. 31 Apr. 7 'Apr. 9 Apr. 9 Spring Spring Spring OTHER None "—Included in table for first time. 1/ Includes corporate and other issues of $15 million and over; State and local government ipsues 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. : Exhibit I Yields on New and Outstanding Electric Power Bonds, Rated Aa and A 1/ Date 1952 - 1957 High Low 1958 - January February March April May 7 13 15 16 20 21 22 28 June 10 17 25 July 2 9 18 23 Oct. 7 15 28 29 Dec. 17 1959 - Jan. 7 20 28 Feb. 18 Aa-rated offering yields A-rated oJffering yields Amount above Amount above . Actual Actual seasoned yields seasoned yields (per cent) (per cent) (basis points) (basis points) 5.00(8/llt/57) 2.93(3/31/51*) 87 -3 *3.60., 3.89^ 1.08 • 3.91 -8 22 35 18 3.90 21 3.85 3.85 16 16 3.85 3.82 3.95 17 12 2k lt.00 It. 10 li.10 It,57 it. 50 lt.lt02y lt.lt 2-^ It. Ult 25 28 29 25 22 12 lit 23 It. 60 M l / . 5.50(11/7/57) 3.00(3/17/5U) 3.962/ lt.07 It. 1 6 lt.01 lt.00 123 -15 3 9 -1 8 ' 3 lt.07 It.35 It 32 It. 00 3.95 -1 -6 3.982/ 1 It,352/ 31 It. 752/ 23 3lt "2 *—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.