Full text of H.16 Capital Market Developments : October 27, 1958
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Not for Publication DECONTROLLED AFTER SIX MONTHS H.lV October 27, 1958. CAPITAL MARKET DEVELOPMENTS (Including Quarterly Review of State and Local Government Security Financing) The volume of public security financing for new capital is expected to be somewhat larger this week than it has been in recent weeks. During the week ending October 2hs large corporate issues, including expiration of subscription rights, totaled # 3 million and State and local government issues totaled $35 million. A foreign government issue for $25 million was also sold. This week, corporations are expected to offer large security issues amounting to $153 million, while State and local governments are expected to offer bonds with aggregate proceeds of $80 million. (Another large State government issue—New York State Power Authority's $200 million bond issue—had been tentatively scheduled for sale in October; however, reports how indicate the sale will probably be later in the year.) A foreign government issue for $28 million is also scheduled for sale this week. Bond yields - Changes in bond yields were mixed, but minor •last week. Yields on outstanding high-grade corporate and State and local government and U. S. Government obligations increased, while those for lower-grade corporate and State and local government bonds declined. Stock prices = Stock prices declined last week after increasing in each of the previous nine weeks. Standard and Poor's index of 500 common stocks closed at 50.81 on October 2k--one per cent lower than a week earlier. Trading:activity slackened somewhat from the unusual pace of the previous week, but continued to be very heavy, averaging 3.9 million shares a day. State and Local Government Security Offerings in the.Third Quarter of 1958 State and local government security issues sold during the third quarter of 1958 were in larger volume than in any earlier third quarter, although as usual sales were smaller than in the first two quarters of the year. State and local governments offered $1.9 billion of long-term bonds in the third quarter, one-fifth larger than in the corresponding period of 1957= Nearly all bonds sold were for the purpose of raising new capital, as refunding issues continued to be small in volume. For the first nine months of 1958 $ State and local government security financing totaled a record $6„li billion—-one-fourth larger than a year earlier. H.lfc - 2 Long-term Security Issues of State and Local Governments Third Quarter (In millions of dollars) 1958 Issuing authority: State County and township Municipality School District Special authority Unidentified 1/ Total 1i36 12k 695 332 301 1,888 I 1957 256 119 563 383 2li5 1,566 Purpose of issues New capital total Schools 2/ Highways, bridges, and tunnels Residential buildings Hospitals and institutions Sewer and water Misc. public service enterprises Veterans' aid Other Unidentified 1/ 571 235 19b 3k 271 95 120 329 5lk 272 37 20 287 kl 75 231 1 1956 119 87 295 29k , 19b 1 1955 77 125 296 210 230 199 1,232 971 . 1*124 1.188- ii06 155 9 5 170 91 2 - 184 273 200 129 7 183 18 8 109 199 272 271 lliO 13 64 10 106 159 a — — — 22 17 12 Total 1,888 1,566 988 1,136 1,181* 488 192 ItO 99 156 2 215 1,110 680 2l±8 191 22 6 30 6k -1,888 1,566 Total m 30% 7 .21 61 35k 163 1,136 37 Type of issue: General obligation Revenue Utility Quasi-utility Special tax Rental Public Housing Authority Federal Government loans 3j 157. 96. 286 177 988 Refunding ' 1 195k 681 15k 1,232 59k m k21 61 122 1 136 3 988 1,136 1,232 n.a.—Not available. 1/ issues of less than $500,000 not further classified. 2/ Data for years prior to 1956 probably understate school issues by about one-fourth because of unclassified small issues. 3/ Coverage for 1956-1958 is broader than for earlier years. Note.—Details may not add to totals because of rounding. Source.—195U and 1955, Bond Buyer and Federal Reservej 1956-1958, Investment Bankers Association of America. Data for 1956-1958 not strictly comparable with data for earlier years. ; H.lli - 3 " Purpose of issue - School construction was the most important purpose of financing as it has been in other recent years. Accounting for 30 per cent of total^offerings, the volume of $571 million sold in the third quarter was about the same as last year; this is in contrast to the first two quarters of the year when school financing was in larger . volume than a year earlier. Issues to obtain funds for sewer and water construction were the second largest in volume and totaled $271 million, slightly less than in the third quarter a year earlier. Sales of bonds for residential building and miscellaneous public service enterprises showed the largest percentage increases this year. New financing for hospitals and institutions and veterans' aid was also larger than a year earlier, but highway financing was in smaller volume. Type of issuer - Most major types of issuing units sold a larger volume of bonds this year than last. The only exception was school districts, whose sales were more than 10 per cent smaller than a year earlier. * While the volume of bonds floated for educational purposes was about the same as last year, a larger proportion was sold by States and special authorities. Municipalities were the most important group of issuers, selling bonds totaling $695 million. This volume accounted for - more than one-third of total offerings and was nearly one-fourth greater than in the third quarter of 1958. Bonds sold by States, totaling $1*36 million, showed the largest increase from a year earlier. (Part of this increase reflects a $100 million issue sold by California for financing veterans' aid. No issue of this size was sold in the third quarter of • 1927.) Type of issue - General obligations continued to be the most important type of issue sold but were slightly less important than last year. Totaling $1.2 billion, these obligations accounted for 63 per cent of all offerings this year as compared with 71 per cent a year earlier. Federal Government loans accounted for a larger proportion of the total this year. The share of revenue bond financing was about the same in both third quarters—accounting for one-fourth of total sales. More detailed information concerning recent capital maricet developments is presented in the attached exhibits. Capital Markets Section, „ Division of Research and Statistics, Board of Governors of the Federal Reserve System. EXHIBIT A HIGH-GRADE BOND YIELDS M LOWER - GRADE BOND YIELDS CORPORATE Boo D LOCAL GOVT. Bao_ H.Ik Exhibit B 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 Corporate Aaa 1/ U. S. Govt, long-term 2/ 3.1*2 (6/19) 2.85 (it/23) U.lll (9/27) It. 13 (10/10) 3.55 (5/2) 3.19 (6/5) 2.16 (8/6) 3.76 (10/18) 3.83 (10/3) 3.07 (it/25) 2.73 1.90 3.45 3.31 2.61t it.ll it. 13 it.13 it. 09 it. 10 3.7it 3.83 3.72 3.7it 3.77 3.2i; 3.25 3.25 3.21 3.23 (Per cent) 1953 195!) 1957 1958 - High Low High High Low Sept.. 26 Oct. 3 Oct. 10 Oct.. 17 Oct. 2k 2/ " (6/25) (9/2) (8/29) (9AD (5/1) .38 .30 .60 .51 .22 .83 .30 •U7 .62 .3it .37 .30 .itl .35 .33 .50 .58 .it7 .53 .5it Lower-grade Bond Yields State and local govt. Baa y Date Corporate Baa 1/ High Low High High Low 3.89 (9/18) 3.itlt (12/31) 5.10 (11/29) it.96 (1/3) it. 51 (7/11) 3.79 (6/25) 2.93 (8/5) lt.5l (8/29) it.3it (9/11) 3.6k (5/1) it. 90 it.92 it.9it it.9it it. 91 it. 29 . it. 29 it. 30 it. 26 it. 2it Spread between Aaa and Baa State and Corporate local govt. (Per cent) 1953 1$5U 1957 1958 - Sept. 26 Oct. 3 Oct. 10 Oct. 17 Oct. 2it 2/ .69 .52 1.27 1.28 .77 1.21 .96 . 1.21 1.11 .98 .79 .79 .81 .85 .81 1.05 l.Oit 1.05 1.05 1.01 1 g/ Preliminary. ' 1/ Weekly average of daily figures. Average term of bonds included is 25-26 years. 2/ Weekly average of daily figures. The series includes bonds due or callable in 10 years or more. 2/ Thursday figures. Only general obligations bonds are included; average tern is 20 years. Note.—Highs and lows are for individual series and may be on different dates for different series. STOCK MARKET Exhibit D Table for Exhibit C Stock Market Date 1953 - High Low 195U - High Low 1955 - High Low 1956 - High Low 1957 - High Low 1958 - High Low August September. Oct. 10 Oct. 17 Oct. 2b 2/ Stock price index 1/ 26.51* 22.95 35.98 2l*.93 15.89 35.28 (1/2) (9/18) (12/31) (1/8) (12/9) (l/ll*) •k9.6k (8/3) 1*3.22 (1/20) 1*9.08 39.1*8 51.1*6 1*0.37 (7/12) (12/20) (10/17) (1/10) 1*7.70 1*8.85 51.39 51.1*6 50.81 Trading Common stock volume 2/ yields V (millions of shares) (per cent) 2.5 0.9 3.7 1.1* 1*.6 1.5 3 1*.2 1 Stock market customer credit Customers Bank Total debit bal- loans to ances!:/ "others" 5/ (Millions of dollars) 2,1*55 2,055 3,1*36 2,1*05 1*.08 1*,030 1*.1*1 3,537 l*,0l*7 3,911* 3.82 l*.3l* .2$ 3.50 1*.58 s 1.7 3.0 3.1* 3.8 1*.9 3.9 3.78 3.69 3.50 3.50 3.51* 1*,199 1*,313 n.a. n.a. _ n.a. 1.1* k.9 1*,313 3,551* 1,665 1,311* 780 661* 2,388 1,01*8 1)653 2,805 2,517 2,823 2,71*0 2,887 2,1*82 3,111* 2,1*87 71*6 1,21*1 3,013 3,111* 1,018 1,267 1,155 1,163 1,051* 1,317 1,051 1,186 1,199 1,166 1,180 p/ Preliminary. ' n.a.—Not available. 1/ Standard and Poor's composite index of 500 common stocks, weekly closing prices, I9ltl-lt3"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 oh which price index reached its high or low. h/ End of month figures for member firms of the New York Stock Exchange which c a n y 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 70 per cent of loans to others. For further detail see Bulletin. Note.—Highs and lows are for individual series and may be on different dates for different series. Exhibit E Long-term Corporate and State and Local Government Security Offerings and Placements (In millions of dollars) 1959 January February March i,!£y April May June 1,110. 600 881 July August September October November December 1st 2nd 3rd lith quarter quarter quarter quarter 1st half Three quarters Year 1 723 • X e/1,100 e/550 3,135 2,622 e/2,672 ' 5,757 e/8,l*29 New capital Corporate 1/ State and local 2/ 1 1956 1 1956 1957 1958 1 1957 1,060 1,065 1,320 573 . 712 817 812 953 511 7U2 572 506 1*04 696 390 ?§ 1,453 818 1,11*6 . 841 798 895 551 765 546 393 3781*90 735 1,003 921 973 . 1,063 65U 838 . 803 >03 2/61*5 529 581* 1*31 1*08 206 357 1,090 789 1,076 71*5,/ 1,0892/ 1,088 e/650 698 633 698 3,W*5 3,119 2,899 2,95k 2,102 2,805 2,556 2,922 2,276 2,2ltl* 2/1,851 6,59b 9,1*93 12,W*7 1,907 7,163 10,381 > 5 2 0 2/6,371 . 639 31*7 1*09 1,820 1,701* 1,51*U 2,029 1,1*90 1,603 971 1,395 3,521* 5,069 7,099 3,093 1*,06U 5,1*59 Excluding finance companies 1st 2nd 3rd lith quarter quarter quarter quarter 2,891* 2,583 3/2,622 Year 3,237 2,889 2,582 2,810 1,6U7 2,511 2,216 2,826 11,518 9,260 e/ Estimated. 1/ Securities and Exchange Commission estimates of net proceeds. 2/ Data through June 19$6 are Pond Buyer data classified as new capital by Federal Reserve; later data are from the Investment Bankers Association of America and are somewhat more complete as to coverage than the earlier data, particularly for Federal Government loans. 3/ Includes $718.3 million AT&T convertible debenture issue. U/ Includes $571.5 million AT&T common stock issue. Total new capital issues excluding offerings of sales and consumer finance companies. ** / H.1U Exhibit F Other Security Offerings 1/ (In millions of dollars) Long-term Foreign government 2/ Federal agency 3/ 1956 1956 ~1957 1958 1957 I January February March April May 196 53 139 198 120 81 37 30 8 U9 123 h& U2 523 125 56 28 7 30 2 39 October November December 60 1 h iiii 5 21 507 300 April May June July August September 233 U60 60 16k 109 215 100 169 572 Short-tern State and local government h/ January February March 19*55" 60 95 July August September . Year' 1,163 251 72 Federal agency 3/ 196 357 2U9 1UU 161 371 208 638 lj-30 505 380 220 283 336 I469 . 501 323 31U 260 22Ji 370 512 222 125 273 273 lltf 357 35U 205 337 153 125 252 289 U23 2/362 272 272 252 195 207 179 303 ,91 159 1U8 2 9h 328 1,238 255 116 107 222 128 3,27k 2,706 5,513 3,157 ; 26U October ' November December Year 176 209 329 601 206 e/ Estimated. jo/ 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. Issues not guaranteed by the U. S. Government. Source: long-term, Securities and Exchange Commissionj short-term, Federal Reserve. jj/ Principally tax and bond anticipation notes, warrants or certificates and Public Authority notes. In some instances PHA notes included may- have a somewhat DigitizedHousing for FRASER longer term than one year. Source: Bond Buyer. hxhibit 0 Large Lontf-toi-m public Security issues for New Capital (Other than II. S. Treasury) 1/ Proceeds ol". Large Issues Offered (Millions of dollars) Month Corporate 1957 - September October November December 1958 - January February March April May June July August September State and local government Other 2/ 21,5 133 393 537 57k U20 399 318 . 605 1,093 725 356 281 771 209 . 8# 3hh hoh hio 151* 1,357 266 5# 182 300 "505 195 275 109 288 653 161* 86 hi 18 Large Individual Issues Offered October 1 through 2k Issuer Type y Coupon . Amount • Offering (millions Maturity of net inter- yield est cost dollars) Rating CORPORATE •American Cement Corp. S.F. deb. Public Service Co. of Ind. Pfd. Btk. Idaho Power Co. 1st mtg. bds. Peoples Gas Lt. & Coke Co. Cap. stk. Cincinnati-Suburban Bell Deb. Telephone Co. 20.0 1978 5 5.16 A 2ii.3 15.0 18.3 1988 h 1/2 U.50 Aa 25.0 1993 1* 1/2 k.ko Aaa 23.7 12.0 18.0 13.0 25.0 10.0 1959-78 1988 1959-70 1959-78 1959-68 1959-83 STATE AND LOCAL GOVERNMENT Boston, Massachusetts Venice, Illinois Met. Wtr.Dist.of So.Calif. State of South Carolina Cook County, Illinois Oakland Unif .Sch.Dist.,Cal. G.O. Rev.-Ut. Rev.-Ut. G.O. G.O. G.O. 3.80 3.Olt 3.06 3.29 3.28 2.20-3.85 5.oo 2.00-3.10 1.90-3.15 2.15-3.35 2.00-3.1*0 A Aa Aa A Aa . H.Ik Large Individual Issues Offered October 1 through 2k (Cont'd) Type 2/ Amount Coupon rate or Offering 'millions Maturity net interyield of dollars) est cost Rating OTHER Commonwealth of Australia Bds. 25.0 1978 5 5.20 A " n . a . — N o t 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. In the case of State and local government securities, G.O. denotes general obligations3 Rev.-Ut., revenue obligations secured only by income from public utilities; Rev.-Q.Ut., revenue bonds secured' only by revenue of quasi-utilities5 Rev.S.T., revenue bonds- secured by revenue from specific taxes only; Rev.-Rent., revenue bonds secured solely by lease payments. . H.ll* Exhibit H Forthcoming Large Long-term Public Security Offerings for New Capital (Other than U. S. Treasury) 1/ Expected Proceeds from Forthcoming Large Issues Subsequent to date shown During month following date shown Date of computation Corporate | 1957 - Aug. 30 Sept. 30 Oct. 31 Nov. 29 Dec. 31 1958 - Jan. 31 Feb. 28 Mar. 31 Apr. 30 May 29 June 30 July 31 Aug. 29 Sept. 30 %\ 1*58 383 378 198 1,123 I266! 768 161 785 113 2/ [corporate 183 331 339 363 3U5 370 131* 298 1*93 177 225 55 2ia 295 30 30 18 150 110 150 36 — 81*5 61*7 815 1,193 1,161 1,378 1,208 670 561 1*61* 1,01*8 . 3% 911* 216 |<»her 2/ 379 551 51*3 558 561* 1*87 31*1 330 1*93 208 235 125 1*35 521* 30 15 1*5 63 165 110 150 36 — Forthcoming Large Offerings, as of October 21* Issuer Florida Power & Light Co. International Harvester Credit Corp. Glidden Co. Puget Sound Power & Light Co. Hartford Electric Light Co. J. I. Case Co. Columbia Gas System, Inc. Indiana & Michigan Electric Co. Natural Gas Pipeline Co. ? ^Pacific Telephone & Telegraph Co. ^Pacific Telephone & Telegraph Co. Consumers Power Co. Montana Power Co. Commerce Oil Refining Corp. Martin Co. Type Amount Approximate date (millions of offering of dollars) Common stk. Deb. S.F. deb. Deb. 1st nitg. bds. Conv. deb. 20.0 50.0 30.0 15.0 18.0 20.1 Deb. 1st mtp. bds. 1st mtg.p.l. bds. Deb. Common stk. 25.0 20.0 30.0 80.0 16.6 Pfd. stk. 1st mtg. bds. Jeb., bds. & common S.F. deb. 15.0 20.0 1*5.0 25.0 Oct. 29 Oct. 30 Oct. 30 Oct. 30 Oct. 30 Oct. 30 (rights expire) Nov*_. 7 Nov. 7 Nov. 8 Nov. 19 Dec. (rights expire) 1958 1958 1958 1958 H.lli Forthcoming Large Offerings, as of October 2h (Cont'd) Type Amount Approximate date (millions of offering of dollars) . STATE AND LOCAL GOVERNMENT City & Co. of San Francisco, Calif. ^Chicago Metro. Fair & ExpositionAuth City & Co. of Denver, Colorado Los Angeles Dept. of tftr. Pwr.,Calif. St. Louis, Missouri New York State Power Authority ^Chicago, Illinois ^Baltimore Co., Maryland Public Housing Authorities *State of Maryland ^Allegheny Co. Sanitary Auth., Pa. ^Philadelphia, Pennsylvania Florida State Board of Education Chesapeake Bay Ferry Commission State of California Detroit-Metro. Expressway *Los Angeles Sch. Dist., Calif. OTHER Monetreal, Canada G.O. Rev. Rev.-Ut. Rev.-Ut. G.O. ' Rev.-Ut. Rev.-Ut. G.O. G.O. Rev.-Ut. G.O. Rev. Rev.-Ut. G.O. Rev.-Ut. G.O. 26.k 20.0 12.8 10.0 10.8 200.0 25.0 11.5 1+5.3 16.8 20.0 17.U 12.5 lliii.O 50.0 35.0 28.0 Deb. 28.0 Oct. Oct. Oct. Oct. Oct. Oct. Nov. • Nov. Nov. Nov. Nov. Nov. Nov. Nov. Dec. Nov. Nov. 27 27 29 29 29 5 6 6 12 13 20 3 Oct. 29 *—Included in table for first t i m e . ~ ' ' 1/ Includes corporate and other issues of $15 million and over3 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: Republic of Panama's $16.7 million bond issue—proceeds for new capital less than $15 million. H.lii 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 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) 5.00(8/llt/57) 2.93(3/31/51) 87 -3 *3.60 , 3.89^/ It. 08 3.91 -8 22 35 18 3.90 5.50(11/7/57) 3.00(3/17/51I) 3.96^ 1.07 4.16 U. 01 it. 00 3 9 -1 8 3 it.07 it. 35 it 32 it.00 3.95 -1 -6 21 3.85 3.85 16 16 3.85 3.82 3.95 17 12 2it it.00 it. 10 it. 10 It.57 it. 50 25 28 29 25 22 123 -15 3.982/ 1 31 I *—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.