Full text of H.16 Capital Market Developments : October 18, 1956
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Not for Publication DECONTROLLED AFTER SIX MONTHS H.lit October 18, 1956 CAPITAL MARKET DEVELOPMENTS Large public security offerings issued for new capital during the week ending October 12 totaled $90 million for corporations and $55 million for State and local governments. The calendar for this week indicates a substantial volume of offerings. Subscription rights expire on two stock issues with aggregate proceeds offyhkmillion and two other stock issues totaling $56 million are scheduled for flotation. State and local government offerings amounting to #112 million are expected. This total includes the New Jersey Highway Authority issue for $25 million which had been originally scheduled for sale in July, but was postponed because of market conditions in early summer. The leveling-off in yields and improved investor reception in September has apparently brought a number of borrowers back to the market, but more recently with the heavier volume of offerings, some of the new issues have not moved as rapidly. Bond yields - Changes in yields on outstanding bonds were mixed but minor last week. Yields on corporate Baa-rated, State and local government and U. S. Government (old series) bonds increased, while the yields on U. S. Government (new series) obligations were stable and yields on corporate Aaa-rated bonds declined one basis point. Stock market credit - Customer credit in the stock market (excluding U. S. Government securities) declined $29 million during September. At the end of the month, the total outstanding was $3,950 million. Both net debit balances and bank loans to "others" continued to decline. (Preliminary estimates by the New York Stock Exchange had previously indicated the probability of some increase in debit balances, but final figures showed a slight decline.) Borrowing by member firms of the NYSE maintaining margin accounts, except borrowings on U. S. Government securities, increased $23 million while customers1 net free credit balances declined $5 million. These and other data on stock market credit for August and September are shown in the table on the next page. End of month September August Change (Millions of dollars) Customer credit Excluding U. S. Govt, securities - Total Net debit balances Bank loans to "others" Net debit balances secured by U. S. Govt, securities Bank loans"to others for purchasing or carrying U. S. Govt, securities 3,950 2,782 1,168 33 3,979 2,785 1,19k 33 -29 -3 -26 0 U2 III 1 Broker and dealer credit Money borrowed except on U. S. Govt, securities On customer collateral Money borrowed cn U. S. Govt, securities Customers' net free credit balances 2,071 1,777 h2 867 2,0U8 1,742 38 . 872 23 35 U -5 Stock prices - Stock prices, as measured by the SBC index of 265 common stocks, increased 2.7 points during the week ending September 12, closing at 277.9. Trading volume declined substantially, to establish a new low for the year. . Daily data for this week indicate a decline in prices through Wednesday. More detailed information concerning recent capital market developments is presented in the attached exhibits. Business Finance and Capital Markets Section, Division of Research and Statistics, Board of Governors of the Federal Reserve System. EXHIBIT A H I G H - G R A D E BOND YIELDS S. GOVERNMENT STATE AND LOCAL GOVERNMENT Ada u. s Corporate Aaa 1/ long-term 2/ Old series New series Spread between U. S. Govt, State and local govt. (old series) and Corporate 1 State and Aaa J / Aaa J local Aaa (Per cent) 1956 - High Low 3.1*2 2.99 3.09 2.85 3.17 2.91 3.58 3.07 September lit September 21 September 28 October 5 October 12 3.55 3.56 3.58 3.58 3.57 1953 - High 195k - High 1955 - High (6/19) (1/9) (1/8) (k/23) (12/23) (1/7) (10/5) (3/2) 3.15 2.78 2.7k 2.kk 2.9k 2.62 3.22 2.80 3.21 3.15 3.17 3.1k 3.16 (6/6) (12/26) (1/9) (8/7) (8/5) (1/7) (9/7) (2/17) n.a. 3.03 2.89 3.26 2.92 3.26 3.2k 3.23 3.21 3.21 (8/5) (6/10) (9/lk) (2/3) 2.73 1.98 2.21 1.90 2.3k 2.05 2.63 2.17 2.63 2.63 2.62 2.61 2.63 (6/25) (1/8) (6/10) (9/2) (9/8) (5/26) (10/11) (2/23) .38 .19 .k3 .32 .3k .13 .kk .13 .8k .30 - .61 .29 .70 .5k .68 •k5 .3k • kl .kl .kk .kl .58 ..52 .55 .53 .53 1/ Weekly average of daily f i g u r e s . A v e r a g e term of bonds included is 25-26 2/ Weekly averages of daily figures. The old series includes fully taxable, marketable 2 1/2 per cent bonds due or first callable after 12 years through September 1955* and those dor or callable in 10-12 years thereafter; the average term to first call of the bonds included declined from lk years in early 1953 to 11 1/2 years in early 1956. The new series is comprised of the 3 per cent bond of 1995 and the 3 1/k per cent bond of,1978-83. 3/ Thursday figures. Only general obligation bonds are included; average tern is 20 years. Note.—Highs and lows are for individual series and may be on different dates for different series. EXHIBIT B LOWER - GRADE BOND YIELDS Weekly Per cent per annum Corporate Baa 1/ Date State and local govt. Baa 2/ State and local govt, rev. y (Per cent) 1956 - High Low 3.89 (9/18) 3.50 (1/2) 3.7U (1/8) 3.UU (12/31) 3.63 (12/30) 3.L5 (1/lU) U.16 (10/12) 3.58 (3/9) 3.79 (6/25) 2.96 (1/8) 3.32 (1/7) 2.93 (8/5) 3.26 (12/29) 3.02 (1/6) 3.62 (10/11) 3.20 (3/8) 3.27 (6/26) 2.71 (1/2) 3.00 (1/1) . 2.72 (8/13) 2.99 (12/30) 2.76 (1/7) 3.52 (10/12) 2.89 (2/2U) September lit September 21 September 28 October 5 October 12 U.05 U.09 li.12 U.1U U.16 3.60 3.61 3.60 3.58 3.62 3.50 3.U8 3.U9 3 .k9 3.52 1953 - High 195k - High Low 1955 - High 1/ Weekly average of daily figures. Average term of bonds included is 25-26 years. 2/ Thursday figures. Only general obligation bonds are included; average term is 20 years. 3/ Friday figures. Average rating of bonds included is between Baa and A; average term is 20 years. Note.—Highs and lows are for individual series and may be on different dates for different series. STOCK MARKET Stock price index 1/ trading Common volume 2/ (millions yields 3/ of shares) (per cent) Stock market customer credit Customers» debit bal- loans to ances h/ "others" 5/ (Millions of dollars) 1956 - High Low 167.1 ltit.O 221.lt 156.5 270.7 217. h 295-5 257.a August September September 28 October 5 October 12 290.0 278.2 269.3 275.2 277.9 1953 - High Low 195U - High 1955 - High (1/2) (9/18) (12/31) (1/6) (12/30) (1/Hi) (8/3) (1/20) 2.5 0.9 3.7 l.-ii .5.75 5.15 5.33 li. 20 -1.5 3.1 1.5 . 3.78 li. 21 3.86 1.9 2.0 2.0 2.1 1.5 ' 14.02 U.2U h.6 h.22 n.a. 2 ,Wi5 2,055 3,1,36 2,105 It,030 3,537 k,0h7 3,979 . 1,665 1,33h 2,388 1,653 2,805 2,517 2,810 2,7UO 3,979 2,785 n.a. n.a. n.a. 780 661; l,0li8 716 1,2U 1,018 1,267 1,167 1,19b r/1,168 r/1,168 1,189 n.a. n.a.—Not, available. .. r/ Revised 1/ SEC index of 265 common stocks, weekly closing prices, 1939-100; converted to lpTj-U^lOO by Federal Reserve. The conversion factor is 123;91. 2/ Averages of daily trading volume on the New York Stock Exchange. 3/ Moody's 200 common stocksj end of month figures. End of month figures for merit) er 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 member banks. Excludes loans for purchasing or carrying U. S. Government securities at banks in New York and Chicago. Weekly reporting banks account for about 72 per cent of loans to others. Note.—Highs and lows are for individual series and may be on different dates for different series. H.lU Exhibit D Corporate and State and Local Government Security Offerings and Placements (In millions of dollars) 1956 January February - March April May June July August September October November December 1st quarter. . 2nd quarter 1st half 3rd quarter Three quarters 4th quarter Year 579 704 Corporate 19gT 407 1,223 816 1,144 830 886 687 e/1,120 e/700 e/850 597 6a 670 e/850 478 1,162 ^ 632 900 2,073 2,790 M63 e/2,670 e/7,533 547 426 535 790 2,165 2,052 а, 217 1,911 б,128 2,695 8,821 New capital ~mr . . "19^5 State and local 19&~ "19W 404 535 312 396 635 #6 390 538 565 497 656 842 377 490 735 427 350 64l 734 748 909 376 e/215 e/350 470 249 406 649 1,003 290 604 e/625 919 #8 408 423 877 1,608 1,490 1,603 . 1,385 1,372 335 747 1,995 3,603 1,991 5,59k 1,896 3,093 e/94l e/C,034 7,490 1,418 2,803 1,124 3,927 1,984 5,911 4n 853 2?9 261 594 2,334 3,706 1,188 4,894 1,894 6,789 Excluding finance companies 2/ 1st quarter 2nd quarter 3rd quarter 4th quarter Year 1,617 2,520 e/2,li70 1,727 1,870 1,434 2,554 7,569 1,527 1,927 • 1,911 1,792 7,158 e/ Estimated. 1/ Includes $637•2 million AT&T convertible debenture issue. 2/ Total new capital issues excluding offerings of sales and personal finance companies. Note.—Details may not add to totals due to rounding. H.lU Exhibit E Large Public Security Issues for New Capital (Other than U. S. Treasury) 1/ Proceeds of Large Issues Offered (Millions of dollars) Month Corporate 1955 - September October November December 1956 - January February March April May June July August September State and local government 328 805 221 263 95 212 278 395. 623 185 • 592 217 558 23k 716 401 227 192 444 163 157 233 Other 2/ . V 25 50 50 to 20 164 35 184 37 Large Individual Issues Offered October 1 through 12 Type 3/ Amount Coupon (millions Maturity rate or Offering Rating net inter- yield of dollars) | est cost CORPORATE United Aircraft Corp. .Conv. pfd.stk. 31.8 Allegheny Ludlum Steel Corp. Conv. deb. 16.3 Columbia Gas System, Inc. Deb. 25.0 Southern Bell Tel. & Tel. Co. Deb. 60.0 Pacific Finance Corp. Deb. 15.0 Texas Eastern Trans. Corp. Pfd. stk. 15.0 1981 1981 4 4 3/4 4.00 4.70 Baa A 1983 1971 4 4 5/8 3.90 • 4.75 Aaa 2.20-3.20 2.15-2.85 1,90-2.40 2.00-2.65 A Aa Aaa Aa STATE & LOCAL GOVERNMENT Detroit, Michigan State of California Buffalo, New York State of South Carolina G.O. G.O. G.O. G.O. 12.3 35.0 li.U 15.0 1957-81 1958-77 : 1957-71 1957-76 3.09 2.80 2.35 2.64 'i H.llt E-2 Large Individual Issues Offered October 1 through 12 (Cont'd) Issuer Type 3/ Amount Coupon (millions Maturity .rate or Offering Rating of net inter- yield est cost dollars) - STATE & LOCAL GOVERNMENT . (Cont'd) San Bernardino Co., Calif. G.O. Territory of Hawaii Kvty. rev. Baltimore Co., Md. G.O. 6.0 12.5 21.0 1957-76 1958-86 1959-96 2.80 3.8k 3.15 2.10-2.85 Aa 2.70-3.80, / A 2.50-3.25^ A OTHER None r 1/ Includes corporate and other security offerings of $15 million and over/ State and local government security offerings of $5 million and over. 2/ Includes foreign government and International Bank for Reconstruction and Development issues. , • 3/ In the case of State and local government securities, G.O. denotes general obligation; Rev., revenue bondsj G.R,, general obligations additionally secured by facilities revenues; L.L., limited liability obligations secured by pledge of designated revenues; h/ 1986-96 maturities not reoffered. Exhibit F H.lU Forthcoming Large Public Security Offerings.for New Capital (Other than U. S. Treasury) 1/ Expected Proceeds from Forthcoming Large Issues Subsequent to During month following date shown date shown Corporate State and Other 2/ Corporate State and Other 2/ local govt. local govt. Date of computation 805 202 215 70 176 123 380 568 198 1*37 2U7 369 315 1955 - Sept. 30 Oct. 31 Nov. 30 Dec. 30 1956 - Jan. 31 Feb. 29 Mar. 30 Apr. 30 May 31 June 29 July 31 Aug. 31 Sept. 28 __ 843 330 205 121 327 220 132 173 332 81 131 359 50 . 37 — 909 hl2 230 85 • 376 233 1,013 818 as 567 1,096 1,202 1,009 2,205 1,650 756 618 917 785 811 832 9itl 690 726 958 1,197 50 37 -— Forthcoming Large Offerings, as of October 12 Issuer Type Amount Approximate date (millions of offering of dollars) CORPORATE Long Island Lighting Co. Conv. pfd. stk. 18,0 Georgia Pacific Corp. Commonwealth Edison Co. Johns-Manville Corp. Common stk. Pfd. stk. Common stk. 15.9 1*0.0 25.9 Consolidated Edison Co. National Steel Corp. Ohio Power Co. *Allied Stores Corp. American Tel. & Tel. Co. 1st & ref. mtg.bds. iiO.O 1st mtg. bds. 55.0 28.0 1st mtg. bds. S.F. deb. 15.0 Common stk. 572.6 ^Public Service Electric & Gas Co. Seaboard Finance Co. J. P. Stevens & Co. Michigan Wisconsin Pipe Line Co. 1st &ref.mtg.bds. S.F. notes S.F. deb. 1st,mtg. bds. 50.0 15.0 28.7 25.0 October 15 (rights expire) October 17 October 17 October 17 (rights expire) October 2b October 25 October 30 November 1 November 5 (rights expire) November 15 1956 1956 1956 H.lU F-2 Forthcoming Large Offerings, as of October 12 (Cont'd) Issuer Type Amount Approximate date (millions . of offering of dollars) STATE AND LOCAL GOVERNMENT Washington Co., Md. Hagerstown, Md. Charlotte, N. C. State of Massachusetts Ft. Pierce, Florida St. Louis Bd. of Education, Mo. New Jersey Highway AuthorityFlint, Michigan Philadelphia, Pennsylvania Boston, Massachusetts Territory of Hawaii State of Maryland Orlando, Util. Comm., Fla. Salt River Project & Agricultural Improvement & Power Dist., Ariz. State of Ohio -xDallas, Texas State of Connecticut Harris Co., Texas Chicago, 111. Chicago Bd. of Education, 111. Florida State Bd. of Education Jacksonville Expressway Authority Florida State Turnpike Authority Memphis, Tennessee Oklahoma Turnpike Authority Pennsylvania Turnpike Commission Washington State Toll Bridge Auth. Inter-American Center Auth., Fla. New York State Thruway Authority 8.0 G.O. G.O. ' 5.8 G.O. . 5.2 G.O. 57.6 Elec.& water rev. 5.1 G.O. .5.5 Rev. 25.0 G.O. 5.h G.O. . 58 .8 G.O. 5.8 12.0 G.O. G.O. . 8.7 Elec. & water rev. 7.5 G.O. • L.L. Airport rev. Expressway rev. G.O. Water rev. G.O. G.O. Rev. Rev. • Elec. rev. Rev, Kev. Rev. Rev. . G.O. 10.0 25.0 6.5 75.0 6.0 5.0 10.0 9.3 1*2.0 185.0 135.0 65.0 62.0 227.0 20.0 50.0 Deb. 35.0 October 17 October 17 October 17 October 18 October 18 October 19 October 19 October 22 October 23 October 23 October 23 October 23 October 2k October 2k October 25 October 29 October 30 November 9 November 13 November lit November 27 Fall Fall Winter 1956 1956 ' 1956 1956 1956 OTHER .-^Quebec Hydro-Electric Commission October 30 -X-—Included in table for first time. 1/ Includes corporate and other issues of $15 million and over; State arid local*government issues of 55 million and,over. . 2j Includes foreign government and International Bank for Reconstruction and Development issues. Note.—Deletions for reasons other than sale of issue: None. Exhibit G Yields on New and Outstanding Electric Power Bonds, Rated Aa and A 1/ Aa-rated offering yields A-rated offering yields Amount abo\ e Amount above Actual Actual (per cent) seasoned yields (per cent) seasoned yields (basis points). (basis points) Date 1952 average 1953 average 195h average • 1955 average 1956 - January February March 8 16 23 30 April U h n 25 May 9 16 2k June 8 20 July 3 18 25 August 1 30 September 11 13 25 October 10 ) 1 3.16 3,16 3.03 3.23 13 16 3 9 None *3.15 3.19 3 5 3.37 18 3.77 ho 3.53 3.52 19 18 3.62 3.70 26 33 h.07 it. 20 L17 iuOl 52 62 58 37 3.35 3.78 3.12 3.33 12 26 -3 12 None 3.23 -5 3.35 7 3.55 3.57 3.60 3.67 25 23 26 29 3.80 3.73 32 2h 3.75 3.82 27 28 1*. 00 W 1U0 63 *—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.