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F/zv/i/vc/>a l o/ir/» Week ending: September 22, 1982 LfBRARY SEP 2, 7 1982. The interest rate spread between Treasury securities of different maturities reflects both the expected course of future interest rates and the premium associated with greater liquidity. The spread between 6-month and 3-month Treasury bill rates has recently widened, indicating that investors are either anticipating a sizable increase in short-term rates later this year or are willing to pay a larger premium for liquidity. Over the last eight weeks, the spread between these two secondary market rates has averaged 133 basis points, compared with 41 basis points in the preceding eight-week period. To illustrate the source of this spread, consider the September 20, 1982, T-bill auction results. The average 13-week T-bill was priced to yield a return of 7.85 percent. In comparison, the 26-week T-bill was priced to yield a 9.44 percent return. Consider an investor planning a $10,000 six-month investment on that date. By comparing two alternative investment strategies, one can deduce the investor’s expectations of future interest rates, assuming no liquidity premium is required. Likewise, one can determine the liquidity premium itself, assuming no expected change occurs in interest rates. The two alternative six-month investment strategies are: (1) the purchase of a 26-week T-bill, and (2) the purchase of two successive 13-week T-bills. Under the first investment strategy, the investor knows with certainty the six-month yield if the bill is held to maturity. Under the second strategy, however, the investor is uncertain of the full six-month yield because the yield on the second 13-week T-bill is unknown at the beginning of the investment period. The advantage of the second strategy is that the investor knows at the outset what the cash value of his investment will be 13 weeks after investing. An investor who forsees a possible need for his money in 13 weeks will be attracted to such an investment strategy. The price he is willing to pay for this feature is commonly referred to as a liquidity premium. An investor unwilling to pay a liquidity premium is concerned only with the expected return. In such a case, someone expecting a 9.44 percent return for the full six months by buying two successive 13-week T-bills must be anticipating a 13-week T-bill rate of over 11 percent in December. Alternatively, if he expects no change in the 13-week T-bill rate, then the difference between the 11 percent rate and the expected 7.85 percent is a measure of the liquidity premium. —Scott E. Hein Prepared by Federal Reserve Bank of St. Louis http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Released: September 24, 1982 2 ADJUSTED MONETARY BASE AVERAGES OF DAILY FIGURES SEASONALLY ADJUSTED BY THIS BANK BILLIONS OF DOLLARS '82 ---------- 1------------- 1------ BILLIONS OF DOLLARS ------------------- ----------- 182 billions — AUG. 179.7 179.7 179.3 180.3 179.9 180.5 LI I 1. 1 1. AUG SEP OCT 1981 NOV DEC JAN LATEST DATA PLOTTED WEEK ENDING: FEB MAR SEPTEMBER 22, APR MAY JUN 1982 SEP OCT 1982 THE ADJUSTED MONETARY BASE CONSISTS OF: ( 1 ) RESERVE ACCOUNTS OF FINANCIAL INSTITUTIONS AT FEDERAL RESERVE BANKS, C 2 ) CURRENCY IN CIRCULATION (CURRENCY HELD BY THE PUBLIC AND IN THE VAULTS OF ALL DEPOSITORY INSTITUTIONS), AND (3) AN ADJUSTMENT FOR RESERVE REQUIREMENT RATIO CHANGES. THE MAJOR SOURCE OF THE ADJUSTED MONETARY BASE IS FEDERAL RESERVE CREDIT. DATA ARE COMPUTED BY THIS BANK. A DETAILED DESCRIPTION OF THE ADJUSTED MONETARY BASE IS AVAIL ABLE FROM THIS BANK. ADJUSTED MONETARY BASE COMPOUNDED ANNUAL RATES OF CHANGE, 9/23/81 12/23/81 AVERAGE OF FOUR WEEKS ENDING: 2/24/82 3/24/82 4/21/82 5/19/82 6/23/82 6.6 7.7 9.3 7.3 7.4 7. 1 8.9 10.5 7.8 7.8 7.4 11.8 7.8 7.8 7.3 6.7 7. 1 6.7 4.0 4.3 TO THE AVERAGE OF FOUR WEEKS ENDING: 2/24/82 3/24/82 4/21/82 5/19/82 6/23/82 7/21/82 8/25/82 9/22/82 7.3 7.0 7.1 7.5 8.2 7.3 7.4 7.2 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 8.7 8.5 8.8 9.6 8.2 8. 1 7.8 PREPARED BY FEDERAL RESERVE BANK OF ST. LOUIS ADJUSTED RESERVES AVERAGES OF DAILY FIGURES SEASONALLY ADJUSTED BILLIONS OF DOLLARS BILLIONS OF DOLLARS 52 billion? AUG. 50.0 49.3 JAN LATEST DATA PLOTTED WEEK ENDING: FEB SEPTEMBER 15, 1982 ADJUSTED MONETARY BASE (RESERVE ACCOUNTS OF FINANCIAL INSTITUTIONS AT FEDERAL RESERVE BANKS PLUS CURRENCY IN CIRCULATION) LESS CURRENCY HELD BY THE NONBANK PUBLIC. ADJUSTED RESERVES COMPOUNDED ANNUAL RATES OF CHANGE, AVERAGE OF FOUR WEEKS ENDING: 9/16/81 12/16/81 2/17/82 3/17/82 4/14/82 5/12/82 6/16/82 7/14/82 6.2 8.3 6.4 7.6 7.7 6.0 6.3 6.0 13.3 8.6 10.2 10.0 7. 1 7.3 6.8 7.0 10.3 9.8 5.8 6.3 5.8 5.4 6.7 2.5 3.9 3.7 12.5 5.0 6. 1 5.4 0.0 3.1 3.0 0.0 0.8 6.0 TO THE AVERAGE OF FOUR WEEKS ENDING: 2/17/82 3/17/82 4/M/82 5/12/82 6/16/82 7/M/82 8/18/82 9/15/82 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis PREPARED BY FEDERAL RESERVE BANK OF ST. LOUIS 3 4 MONEY STOCK ( Ml ) AVERAGES OF DAILY FIGURES SEASONALLY ADJUSTED 450 ii. / 455 A" z Zj 450 TTTT TTTT r— 1 i 445 440 435 430 11LL Illl Illl Illl 430 425 460 11 ,A TTTT 435 = A In n 445 440 465 453.6 454.8 456.2 457.0 461.9 460.6 Illl 11 18 25 -SEP. 1 8 Z 15 In n m i 455 BILLIONS AUG. IN I 460 1982 1 MM = 465 BILLIONS OF DOLLARS 470 TTTT BILLIONS OF DOLLARS 470 = 1 420 E 415 s -11..L 1.1 1 1 -LLL .in -LLLL -LLL III 2 16 30 14 28 II SEP OCT 1981 25 NOV 8 23 LATEST DATA PLOTTED WEEK ENDING: 6 20 3 JAN DEC hi 1 l.u. FEB 17 3 17 31 MAR SEPTEMBER 15, CURRENT DATA APPEAR IN THE BOARD OF GOVERNORS’ ii i 14 28 APR 1111 .ii i. 12 26 9 23 7 21 MAY JUN ' 1982 JUL in 4 18 AUG ini. -LLL I 15 28 13 27 SEP OCT 1982 H.6 RELEASE. Ml CONSISTS OF CURRENCY HELD BY THE NONBANK PUBLIC PLUS COMMERCIAL BANK DEMAND DEPOSITS HELD BY THE NONBANK PUBLIC (EXCLUDING THOSE HELD BY FOREIGN BANKS AND OFFICIAL INSTITUTIONS) AND OTHER CHECKABLE DEPOSITS OF ALL DEPOSITORY INSTITUTIONS PLUS TRAVELERS’ CHECKS. MONEY STOCK (Ml ) COMPOUNDED ANNUAL RATES OF CHANGE, 9/16/81 12/16/81 AVERAGE OF FOUR WEEKS ENDING: 2/17/82 3/17/82 4/14/82 3. 1 3.8 3.6 1 . 1 2.5 4.3 5.5 4.5 1.2 2.8 4.9 4.0 0.2 2.2 4.8 5/12/82 6/16/82 7/14/82 0.4 5.3 12.4 TO THE AVERAGE OF FOUR WEEKS ENDING: 2/17/82 3/17/82 4/14/82 5/12/82 6/16/82 7/14/82 8/18/82 9/15/82 9.2 7.8 7.5 7.2 6.7 5. 1 5.5 6.3 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 8.9 8. 1 7.6 6.7 4.4 5.0 6.2 -2.5 1.3 4.7 PREPARED BY FEDERAL RESERVE BANK OF ST. LOUIS 425 420 MONEY MULTIPLIER^ CURRENCY COMPONENT OF MONEY STOCK 2/ AVERAGES OF DAILY FIGURES SEASONALLY ADJUSTED 1982 RAT IQ. AUG. 2:539 ! 560 Ml MULTIPLIER LATEST DATA PLOTTED WEEK ENDING: SEPTEMBER 15, 1982 BILLIONS OF DOLLARS 132 BILLIONS OF DOLLARS ~ COMPOUNDED ANNUAL RATES OF CHANGE, AVERAGE OF -----THE FOUR WEEKS ENDING SEPTEMBER 15, 1982 FROM - THE FOUR WEEKS ENDING: -----JUL. JUN. -MAY APR. -----MAR. DEC. - SEP. 14, 1982 16, 1982 12, 1982 14, 1982 17, 1982 16, 1981 16, 1981 6.9 6.1 8.0 8.5 8.8 8.5 7.5 CURRENCY glLLIQNS AUG. 29.3 2916 29 .7 30 :o 30:2 30:4 1111111111111111 1981 LATEST DATA PLOTTED WEEK ENDING: SEPTEMBER 15, 19 1982 1/ RATIO OF MONEY STOCK (Ml > TO ADJUSTED MONETARY BASE 2/ CURRENT DATA APPEAR IN THE BOARD OF GOVERNORS' H.6 RELEASE. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis PREPARED BY FEDERAL RESERVE BANK OF ST. LOUIS 5 6 YIELDS ON SELECTED SECURITIES AVERAGES OF DAILY RATES ENDED FRIDAY 22.0 PERCENT 22.0 21 .0 21.0 20.0 20.0 19.0 19.0 18.0 18.0 90 DAY CD'S 17.0 I ME BANK AN RATE 17.0 16.0 16.0 15.0 15.0 .6 14 13.0 12.0 11.0 COMMERCIAL PAPER I0.0 9.0 8.0 5 AUG SEP feb 19 2 16 30 14 28 1! 25 I 15 29 Mar 1982 LATEST DATA PLOTTED ARE AVERAGES OF RATES AVAILABLE FOR THE WEEK ENDING-. SEPTEMBER 24, 1982 AUG. SEP. OCT. 6 I3 20 27 3 I0 17 24 * I 8 15 22 29 1982 90 DAY CD'S PRIME COMMERC1AL PAPER X** PRIME BANKERS' ACCEPTANCES CORPORATE Aaa BONDS CORPORATE Baa BONDS MUNICIPAL BONDS ** 11.43 11.63 9.77 9.73 to. 42 10.58 tO,94 10.74 11.33 11.50 9.68 9.48 10.48 10.72 11.00 10.71 j 1.23 11.23 9.66 9.59 10.18 10.38 10.73 10; 56 14.22 14.14 13.48 13. 15 13.20 13.03 13.08 12.90 16.69 16.71 16.26 15.86 15.73 15.63 15.72 15.68 11.87 11.86 10.82 10.38 10.74 10.75 10.74 N. A. * AVERAGES OF RATES AVAILABLE. *# BOND BUYER'S AVERAGE INDEX OF 20 MUNICIPAL BONDS, THURSDAY DATA. XXX DATA ARE 4-MONTH COMMERCIAL PAPER RATES. N.A. - NOT AVAILABLE http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis PREPARED BY FEDERAL RESERVE BANK OF ST. LOUIS 0 SELECTED INTEREST RATES AVERAGES OF DAILY RATES ENDED FRIDAY PERCENT PERCENT 21.0 21.0 r— —2 20.0 20.0 19.0 18.0 17.0 5-YEAR TREASURY SECURITIES FEDERAL FUNDS RATE 15.0 14.0 13.0 12.0 DISCOUNT RATE 1 1.0 10.0 3-MONTH TREASURY BILL 5 AUG SEP OCT 1981 NOV DEC JAN FEB 19 2 MAR 16 30 APR 14 28 II MAY JUN 1982 25 9 23 JUL 6 20 3 AUG SEP 17 OCT LATEST DATA PLOTTED ARE AVERAGES OF RATES AVAILABLE FOR THE WEEK ENDING: SEPTEMBER 24, 1982 AUG. SEP. OCT. 6 13 20 27 3 10 17 24 * 1 8 15 22 29 FEDERAL FUNDS ** 3-MONTH TREASURY BILL 6-MONTH TREASURY B 1LL 1-YEAR TREASURY BILL 11.15 10.90 10. ! 1 9.04 10. 15 10. 14 10.27 10.31 9.80 9.70 7.88 7.50 8.31 8.34 8.03 7.59 10.67 10.94 9.82 8.99 9.75 9.61 9.70 9.44 11.13 11.06 9.71 9.68 10.12 10.09 10. 12 9.84 5-YEAR TREASURY SECUR1T1ES 13.62 13.59 12.53 12.38 12.54 12.43 12.47 12.20 1982 LONG-TERM TREASURY SECUR1T1ES 13.08 13.02 12. 17 12.04 12.16 12.03 12.02 11.68 # AVERAGES OF RATES AVAILABLE. #* SEVEN-DAY AVERAGES FOR WEEK ENDING WEDNESDAY TWO DAYS EARLIER THAN DATE SHOWN. CURRENT DATA APPEAR IN THE BOARD OF GOVERNORS' H.15 RELEASE. #*# NEW ISSUE RATE RATES ON LONG-TERM TREASURY SECURITIES ARE COMPUTED BY THE FEDERAL RESERVE BANK OF ST. LOUIS. TREASURY BILL YIELDS ON DISCOUNT BASIS. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis PREPARED BY FEDERAL RESERVE BANK OF ST. LOUIS 7 8 TOTAL CHECKABLE DEPOSITS^ BILLIONS OF DOLLARS 335 1 1 1 1 B1LL1QNS 319.9 320.8 322.1 322.6 327.4 TTTT iv M l A____ ' A^ A ) \ rv \J 1 r M il A, TTTT Iim i A / 1 _ 1982 ~ AUG. 11 _ 18 25 -SEP. 1 8 AVERAGES OF DAILY FIGURES SEASONALLY ADJUSTED TTTT BILLIONS OF DOLLARS 335 1 1 1 1 1 1 1 1 1 V TTTT .A. / ^ 1 1 III T T T T n il V 2 in i 1 1 1 11 11 2 18 30 SEP 111 111 14 28 11 OCT 1981 11M 2 NOV 111 in 6 20 3 JAN 1111 J.I l 17 FEB 3 17 31 MAR LATEST DATA PLOTTED WEEK ENDING: SEPTEMBER 15, 1 1..LL liL _LLL i I I i i 11 M 28 12 26 APR MAY 9 23 7 21 JUN 1982 JUL 4 18 AUG 1 1 1 1 15 29 13 27 SEP OCT 1982 1/ DEMAND DEPOSITS PLUS OTHER CHECKABLE DEPOSITS AT ALL DEPOSITORY INSTITUTIONS TOTAL CHECKABLE DEPOSITS COMPOUNDED ANNUAL RATES OF CHANGE, 9/16/81 12/16/81 2/17/82 3/17/82 AVERAGE OF FOUR WEEKS ENDING: 4/14/82 5/12/82 6/16/82 7/14/82 TO THE AVERAGE OF FOUR WEEKS ENDING: 2/17/82 3/17/82 4/14/82 5/12/82 6/16/82 7/14/82 8/18/82 9/15/82 10. 1 8.4 7.8 7.2 6. 1 4. 1 4.7 5.9 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 9.3 8.0 7.0 5.5 2.7 3.7 5.4 1 .6 2.2 1 .3 -1 .8 0.4 3.0 3.5 1.8 -2.1 0.5 3.5 0.9 - 3.8 - 0.2 3.5 -6.8 -1.2 3.6 -1.3 5.3 15. 1 PREPARED BY FEDERAL RESERVE BANK OF ST. LOUIS 325 TOTAL TIME DEPOSITS^ ALL COMMERCIAL BANKS AVERAGES OF DAILY FIGURES SEASONALLY ADJUSTED BILLIONS OF DOLLARS BILLIONS OF DOLLARS 860 BILL I ONS AUG. 850 842.0 840.7 843.0 844.0 844.6 845.0 SEP. 840 830 820 810 800 790 780 770 760 750 740 730 720 710 JLLJ-L 5 19 2 16 30 1.1 J I 14 28 II 25 9 23 3 JAN LATEST DATA PLOTTED WEEK ENDING: 6 20 17 3 31 14 28 ■LI 1 1 FEB SEPTEMBER 15, 17 12 26 1982 1/ SAVINGS DEPOSITS PLUS SMALL TIME DEPOSITS PLUS LARGE TIME DEPOSITS TOTAL TIME DEPOSITS COMPOUNDED ANNUAL RATES OF CHANGE, AVERAGE OF FOUR WEEKS ENDING: 9/16/81 12/16/81 2/17/82 3/17/82 4/14/82 5/12/82 6/16/82 7/14/82 5.9 7.9 9.9 10.8 I 1.7 12.2 12.9 12.3 10.6 13.5 14.3 15.0 15.4 15.9 14.8 21.5 20. 1 19.5 19.2 19.2 17.2 20.4 19.5 19. 1 19. 1 16.9 17.8 17.8 18.2 15.7 18.0 18.4 15.3 18.6 14.3 12.8 TO THE AVERAGE OF FOUR WEEKS ENDING: 2/17/82 3/17/82 4/14/82 5/12/82 6/16/82 7/14/82 8/18/82 9/15/82 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis PREPARED BY FEDERAL RESERVE BANK OF ST. LOUIS 9 0 10 SMALL TIME DEPOS I TS 1/ COMMERCIAL BANK SAVINGS DEPOSITS AVERAGES OF DAILY FIGURES SEASONALLY ADJUSTED BILLIONS OF DOLLARS H— n “ = BILLIONS OF DOLLARS COMPOUNDED ANNUAL RATES OF CHANGE, AVERAGE OF THE FOUR WEEKS ENDING SEPTEMBER 15, 1982 FROM THE FOUR WEEKS ENDING: ET JUL. 14 1982 16, 12, 14, 17, 16, 16, 1982 1982 1982 1982 1981 1981 — 21.2 - JUN. - MAY - APR. r_MAR. - DEC. = SEP. 22.8 21.3 22.6 23.8 19.8 19.1 400 SMALL TIME DEPOSITS .1982, BILLIONS 8 15 41 41 U-jj-llll. 1 1.1 J .1.1.1 LATEST DATA PLOTTED WEEK ENDING: SEPTEMBER 15, 1982 BILLIONS OF DOLLARS 185 = 180 = BILLIONS OF DOLLARS 85 1982 BILLIONS AUC .11 56.1 175 E 170 165 56.8 175 ■= = — ~ 1 45 = = - COMPOUNDE D ANNUAL R \TES 3F THE FOUR WEEKS END 1 sIG SEPTEMBER 15, 1982 'ROM THE FOUR WEEKS END 1 MG: 2 16 30 SEP 14 OCT 1981 28 I I 145 1 140 E 135 E 130 -1..U 23 1 9 DEC .11.1 6 20 JAN 111 1111 3 3 17 FEB _LU_ _LLL 17 31 MAR LATEST DATA PLOTTED WEEK ENDING: SEPTEMBER 15, 14 APR 28 12 MAY 26 1 1 1 1 23 i ii -LLL Ji-Ll- 1 1 1 7 21 4 18 JUN 1982 1 ■■ 15 29 13 27 SEP OCT 1982 1/ COMMERCIAL BANK TIME DEPOSITS ISSUED IN DENOMINATIONS OF LESS THAN $100,000. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 155 150 . 25 NOV 160 E ELjUL. 14, 1982 -7. = JUN. 16, 1982 -10. -MAY 12, 1982 -7. 135 - APR. 14, 1982 -6. = MAR. 17, 1982 -4. = DEC. 16, 1981 -0. 1 130 “SEP. 16, 1981 -1. isi 1111111111111 ii 1 140 170 165 £ ~ 150 180 II: 15 SAVIN GS DE POSITS 1 If: si A SEP • = PREPARED BY FEDERAL RESERVE BANK OF ST. LOUIS BORROWINGS FROM FEDERAL RESERVE BANKS AVERAGES OF BILLIONS OF DOLLARS DAILY FIGURES BILLIONS OF DOLLARS 4.5 1982 ~ AUG. MILLIONS 1 30 14 28 11 25 23 6 20 3 17 3 LATEST DATA PLOTTED WEEK ENDING: SEPTEMBER 22, 17 31 14 28 12 26 1982 BUSINESS LOANS u (COMMERCIAL AND INDUSTRIAL) WEEKLY REPORTING LARGE COMMERCIAL BANKS 2/ SEASONALLY ADJUSTED BY THIS BANK BILLIONS OF DOLLARS BILLIONS OF DOLLARS ------------------- -------- Z] 220 220 r=------- ,------------,----_ COMPOUNDED ANNUAL RATES - OF CHANGE. AVERAGE OF Z THE FOUR WEEKS ENDING - SEPTEMBER 15, 1982 FROM ~THE FOUR WEEKS ENDING: ' JUL. 14, - JUN. 16, Z MAY I 2 , 1982 1982 15.6 1982 1982 1981 1981 .... 15.3 MILLIONS AUG. 1 1 SEP. 213,237 213,201 212,864 1 214,967 1.1 I 1 I 1 I I I I I I I I 2 AUG 16 30 SEP 14 OCT 1981 28 11 25 NOV 9 23 DEC 6 20 JAN 3 FEB 17 31 MAR LATEST DATA PLOTTED WEEK ENDING: SEPTEMBER 15, 14 APR 28 12 MAY 26 9 23 JUN 1982 JUL AUG SEP OCT 1982 1/ BUSINESS LOANS INCLUDE BANKERS1 ACCEPTANCES AND COMMERCIAL PAPER. 2/ BANKS WITH DOMESTIC ASSETS OF t750 MILLION OR MORE http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis PREPARED BY FEDERAL RESERVE BANK OF ST. LOUIS 11 LARGE TIME DEPOSITS ALL COMMERCIAL BANKS BILLIONS OF DOLLARS AVERAGES OF DAILY FIGURES SEASONALLY ADJUSTED BILLIONS OF DOLLARS 290 285 280 275 250 245 240 235 1981 LATEST DATA PLOTTED WEEK END INGs SEPTEMBER 15. 1982 CURRENT DATA APPEAR IN THE BOARD OF GOVERNORS' H.6 RELEASE. TIME DEPOSITS ISSUED IN DENOMINATIONS OF •100,000 OR MORE. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis PREPARED BY FEDERAL RESERVE BANK OF ST. LOUIS