Bluebook

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1

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2

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Content last modified 6/05/2009.

(CONFIDENTIAL

FR)

May 11,

1973

MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Prepared for the Federal Open Market Committee

By the Staff BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

May 11,

CONFIDENTIAL (FR)

1973

MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1)

Both M1 and M2 appear to be expanding at annual rates somewhat

above the upper ends of the Committee's April-May ranges of tolerance.

Growth

in RPD for the same period, however, seems to be falling short of its range, as shown in the table.

The divergent tendencies evident in money supply

and RPD expansion are attributable to a lower than anticipated average level of excess reserves in May; to greater than anticipated growth in currency, which swells M

but does not absorb required reserves; and to a

difference (still partly projected) in the weekly pattern of deposits from that projected earlier (which affects the required reserve component of RPD with a lag). Growth of Monetary Aggregates and RPD in April-May period

(SAAR in Per Cent)

RFD

Current

Ranges of Tolerance

Estimates

10 - 12

8.0

M1

4 -

6

M2

4-1/2--6-1/2

7.0 8.0

Memo:

Federal funds rate

6-7/8--7-1/2 Week Ending May 2: 7.43 May 9: 7.60

(2)

The tendency for money supply growth to exceed the Committee's

target ranges became evident soon after the last meeting, and the Desk, while

-2taking account of even-keel, adopted a somewhat more reluctant reserve supplying strategy.

This was expected to raise the Federal funds rate from

the 6-7/8 to 7 per cent range prevailing at the time of the last meeting into a 7-1/4--7-1/2 per cent range.

In the week ending May 2 the average

funds rate rose to 7.43 per cent, and then in the most recent week to 7.60 per cent.

During these two statement weeks, member bank borrowings

averaged $1.7 billion, little different from the preceding four weeks. (3)

The recent rise in the funds rate to more than 7-1/2 per

cent reflected unexpected shortages in the supply of reserves arising partly from a large shortfall in float over the week-end of May 5, which was partly related to delays in transfers of funds to banks because of a computer failure.

In response to developing money market tightness in the

most recent period, the Desk supplied reserves mainly through repurchase agreements.

The impact of the higher funds rate on market attitudes was

blunted by the reserve supplying efforts of the Desk, by the relatively low volume of total dealer positions, and by the ready availability of dealer financing at favorable rates from non-bank institutions. (4)

During most of the inter-meeting period, interest rates on

market securities showed little net response to the rise in funds rate.

the Federal

While average issuing rates in the auction of the Treasury's

new 6-7/8 per cent note and 7 per cent bond were apparently nudged upward, these securities dropped somewhat in yield in

the immediate post-auction

period, and yields on short-term bills declined about a quarter of a percentage point, with the 3-month issue moving to just under 6 per cent. This drop reflected both current and prospective shortages in the market

-3supply of Treasury bills.

In addition to the usual April and June redemptions

of tax bills, the Treasury recently initiated a cut-back of its

regular

bill auction by $100 million a week; $1.7 billion of the maturing May securities will be redeemed--creating potential demands for bills; the rest of the May maturities were refunded into longer-maturity notes and bonds; and it was announced that the initial Treasury cash borrowing in the new fiscal year might not come until early August. (5)

Following the 1/4 point rise in

the discount rate to 5-3/4

per cent on April 23, a further increase to 6 per cent was announced Yesterday's announcement was received relatively quietly by

Thursday. the market.

Bill rates initially adjusted upward about 10 basis points,

but rose further on Friday as the day progressed, perhaps in part due to persisting money market tightness on that day. recently was quoted 6.23 per cent bid. in Treasury and other bond markets. meeting,

The 3-month bill most

There were minor price declines

On balance,

since the last Committee

corporate and municipal bond yields have changed little,

while

mortgage rates have edged up and longer-term Government securities have advanced about 1/8 of a percentage point in response to the Treasury's debt lengthening operation. (6)

The table on the following page shows (in

percentage annual

rates of change) selected monetary and financial flows over various time periods.

J

-

~

Past 3 Calendar Years Dec. '72 over Dec. '69

-

Past 12 Months Apr. '73 over Apr. '72

Past 6 Months

Past 3 Months

Past Month

Apr.

'73

Apr.

'73

Apr.

' 73

Oct.

'72

Jan.

'72

Mar.

'73

Total reserves

8.4

9.0

10.1

Nonborrowed reserves

8.8

2.8

0.5

Reserves available to support private nonbank deposits

9.0

9.7

1.2

12.6

-8.7

26.5

11.3

10.0

Concepts of Money M 1 (currency plus demand deposits)l/

5.3

4.5

7.9

M2 (Ml plus time deposits at commercial banks other than large

11.3

9.0

7.7

6.4

8.3

12.8

11.0

9.5

8.1

8.3

Total member bank deposits (bank credit proxy adj.)

10.7

12.8

14.1

16.8

13.7

Loans and investments of commercial banks 2/

12.4

15.3

16.8

16.1

6.4

CD's) M3 (M2 plus deposits at thrift institutions) Bank Credit

Short-term market japer (Monthly ave. change in billions) Large CD's

3.1

Nonbank commercial paper

0. 1

4..8 -0.9

3.8

4

1/ Other than interbank and U.S. Government. 2/ Based on month-end figures. Includes loans sold to affiliates and branches. 3/ Less than $50 million. 4/ Latest data March, 1973. NOTE: All items are based on averages of daily figures, except for data on total insti-tuloons and investments of commercial ban-s, .commercial paper, and thrift tions--vhich are either end-of-month or last-Wednesday-of-month figures.

Prospective developments (7)

Alternative long run monetary objectives and associated

short-run ranges of tolerance are summarized in the table below for Committee consideration.

(More detailed figures are shown in the

table on the following page). Alt. A

Alt. B

Alt. C

M1

6--6-1/2

5--5-1/2

4--4-1/2

M2

7--7-1/2

6--6-1/2

4-1/2--5

9-1/2--10

9--9-1/2

8--8-1/2

8-1/2--9

7-1/2--8

6-1/2--7

Longer-run targets (represented by growth rates for 2nd and 3rd quarters of 1973)

Credit proxy RPD Associated ranges for May-June RPD

10--12

9--11

7-1/2--9-1/2

M

5--7

4--6

3-1/2--5-1/2

1

M 6-1/2--8-1/2

5-1/2--7-1/2

4-1/2--6-1/2

6-3/4--7-1/2

7-1/4--8

7-1/2--8-1/2

2 Federal funds rate range (inter-meeting period)

(8)

Alternative B is consistent with the long run path for the

aggregates (as indexed by M 1 growth of 5--5-1/2 per cent) adopted by the Committee at recent meetings.

Attainment of these longer-run objectives

might well involve some further tightening of the money market, with

-5a-

Alternative Longer-Run Targets for Key Monetary Aggregates Adjusted Credit Proxy

M1

Alt. A 1973

Apr. May June

Sept.

Alt. A

Alt. B

Alt. C

542.3

Alt. C 536.3 539.6 541.2

426.4 429.2 434.1

426.4 429.2 433.8

426.4 429.0 433.0

549.1

545.5

442.3

441.0

439.2

258.3 259.6 260. 8

Alt. B 258.3 259.5 260.6

Alt. C 258.3 259.4 260. 3

Alt. A 536.3 539.9 543.0

Alt. B 536.3 539.8

264.6

263.5

262.4

551.7

Rates of Growth Quarters: 1973 2nd Q. 3rd Q.

6.5 6.0

6.0 4.5

5.75 3.6

8.0 6.5

6.5 3.0

12.0 7.5

11.5 6.5

11.0 5.5

Mwhths: May June

6.0 5.5

5.5 5.0

5.0 4.0

8.0 7.0

7.5 3.5

8.0 13.5

8.0 13.0

7.5 11.0

1973

Apr. May June

Total Reserves Alt. b Alt. A 32,335 32,335 32,409 32,417 32,415 32,461

Sept.

32,704

32,543

Alt. C 32,335 32,401 32,343

Alt. A 29,869 30,021 30,409

IRPo Alt. B 29,869 30,014 30,363

32,343

30,946

30,786

Alt.

C

29,869 30,005 30,292

30,586

Rates of Crowth Quarters:

1973 2nd

6.0

5.0

3rd

3.0

1.5

3.0

2.5

Montha: Tay June

1.5

4.5

2.5

-2.0

10.5 7.0 6.6 15.5

10.0 5.5 6.0

14.6

9.0 4.0 5.5 11.5

-6the funds rate between now and the next Committee

meeting probably moving

up toward the top of the 7-1/4--8 per cent range shown.

This represents

somewhat tighter money market conditions than were specified at the time of the last meeting as consistent with the given longer-run objectives for the aggregates.

This specification of tighter money market conditions re-

flects the greater strength of money supply in recent weeks and the sizable upward revision in the projection of nominal GNP for the second quarter. (9) in April.

In May-June, M 1 growth is indicated to be less rapid than

Income tax refunds will be tapering off in the forthcoming

period, and growth will also be held down by the cumulative impact of past interest rate increases together with the restraint on reserve growth targeted.

By the third quarter, a further modest slowing in M 1 growth

would be needed to attain the longer-run target.

This might be accomplished

without any additional tightening in money market conditions beyond the 7-1/4--8 per cent funds rate range,

particularly if,

as projected,

the rate of growth

in GNP moderates. (10)

Between now and the next Committee meeting the 3-month

Treasury bill rate is likely to move back up into a 6-1/4--6-5/8 per cent range under alternative B.

The recent rise in the discount rate and the

somewhat tauter money market conditions anticipated will put pressure on dealer financing costs and will also give banks a further incentive to sell or liquidate bills as compared with other forms of adjustment.

In addition,

a $1--$2 billion drop in the Treasury balance at the Fed is anticipated prior to mid-June tax receipts and this will cause the System to sell more bills than otherwise into the market.

The bill

rate is

unusually low relative to the funds rate, however.

still

expected to remain

The Treasury's favorable

cash position has enabled it to pay down maturing coupon issues and bills, and

the Treasury has also stressed debt lengthening in its refunding operations. In this assessment of the bill market, we have not assumed any substantial reflow of funds from abroad. (11)

Pressure on bank liquidity positions is expected to persist

in the weeks ahead as bank lending continues to grow at a rapid pace.

There

has been some moderation of business loan demands as the shift of commercial paper borrowers to banks has abated.

Nevertheless, the projected rapid

rate of business inventory accumulation and large plant and equipment outlays indicate basic strength in credit demands. (12)

These demands are likely to be financed in

issuance of CD's in quarter pace.

sizable volume,

large part by

though diminished from the record first

If the cost of issuing CD's is increased (by raising reserve

requirements), the amount of CD's issued will probably be cut back somewhat because of the higher effective rate,

banks will shift to other

forms of raising funds (such as selling securities), and lending terms to business may righten somewhat further. (13)

The availability of bank credit to finance demands will

also be dampened by an expected further slowing of net inflows of consumertype time and savings deposits as short-term interest rates edge higher. The staff has not assumed a rise in Regulation Q ceilings that pertain to such deposits.

Given this assumption, a more marked slowing of consumer-

type time deposit flows is anticipated around the mid-year interest crediting period and continuing into the third quarter, when Treasury bill rates are expected to rise further.

(14)

Long-term interest rates seem likely to rise somewhat under

the conditions of alternative B partly as restraint on bank credit availability

leads banks to participate relatively little

in securities markets.

as suppliers of funds

Reduced flows of funds to nonbank savings institu-

tions will also work toward upward pressure on mortgage rates and on debt markets more generally as Federal agencies offer sizable amounts of securities to help support the mortgage market.

Demands on long-term bond

markets, however, still appear quite moderate, and this may permit a rise in short rates to develop without significant impacts on long rates.

But

expectations are very important in the determination of long rates, and should monetary actions be interpreted as implying that credit will tighten substantially further, or remain tight for a more extended period than expected, (15)

long rates could well come under more upward pressure. Alternative A indicates specifications that appear consis-

tent with a policy move toward a higher growth rate for the aggregates than encompassed in alternative B.

This alternative implies some easing

of money market conditions in the weeks ahead. (16)

Under alternative C, which moves toward a lower long-run

growth rate for the aggregates, it would appear that the Federal funds rate would probably have to rise above 8 per cent over the period immediately ahead.

Because of lags the main impact on M1 growth would not

occur until the third quarter, when--to achieve the 4--4-1/2 per cent long-run objective--M1 growth would have to fall to a 3 per cent annual rate.

M2 growth also would slow sharply, given the significantly higher

short-term rates and assuming no increase in Regulation Q ceilings for

-9consumer-type time deposits.

Given the low growth rates for the aggre-

gates expected for the third quarter under this alternative, the Committee may find it necessary to ease money market conditions in the course of summer if it desires to stay on the longer-run growth paths of alternative C thereafter.

-10-

Proposed directive Presented below are three alternative formulations for

(17)

the operational paragraph of the directive, which might be taken to correspond to the similarly lettered policy alternatives discussed in the preceding section.

In light of the comments by a number of members at the

previous Committee meeting about the disadvantages of using such qualitative terms as "moderate" or "modest" to characterize the desired growth rates in the monetary aggregates, such objectives have been expressed relative to the actual growth over the past 6 months. rates are shown in the table on page 4.

These 6-month growth

The diverse behavior of the various

monetary aggregates, however, creates difficulties in characterizing future targets in the same way relative to past performance for all aggregates. (18)

The 6 month comparison works quite well for M1, since

the long-term target range specified under alternative B (5--5-1/2 per cent) and the short-run range of tolerance encompass the 5-1/4 per cent growth rate experience in the past 6 months; the ranges specified under A and C are, respectively, somewhat above and somewhat below the 6-month pace.

For the bank credit proxy, actual growth over the past 6 months

exceeds both the long-run target and near-term expectations under all three alternatives.

For RPD and M 2 , the situation is a little more compli-

cated, but for the most part the previous 6-month rates of expansion are above specifications in the three alternatives (with some exceptions in alternative A).

-11(19)

The directive language below attempts to take account of

the differences in specified future movement of the aggregates relative to the past.

As will be noted, an instruction to take account of credit market

developments is included in alternative C since the relatively sharp tightening of money market conditions contemplated could lead to undesirably rapid adjustments in credit markets generally. Alternative A To implement this policy, [DEL: forthcoming of account taking while Treasury financing]

the Committee seeks to achieve bank reserve

and money market conditions consistent with SOMEWHAT FASTER aggregates] monetary [DEL: moderate]growth in [DEL:

THE NARROWLY DEFINED

MONEY STOCK over the months ahead THAN OCCURRED IN THE PAST

6 MONTHS ON AVERAGE BUT SOMEWHAT SLOWER GROWTH IN OTHER KEY MONETARY AGGREGATES. Alternative B To implement this policy, financing] Treasury

[DEL: forthcoming of account taking while

the Committee seeks to achieve bank reserve

moderate] growth in and money market conditions consistent with [DEL: [DEL: aggregates] monetary

THE NARROWLY DEFINED MONEY STOCK over the

months ahead AT ABOUT THE AVERAGE RATES OF THE PAST 6 MONTHS AND SLOWER GROWTH IN OTHER KEY MONETARY AGGREGATES.

-12Alternative C To implement this policy,

while taking account of [DEL: forthcoming

Treasury financing] CREDIT MARKET DEVELOPMENTS,

the Committee seeks

to achieve bank reserve and money market conditions consistent with SOMEWHAT SLOWER [DEL: moderate]growth in monetary aggregates over the

monnths ahead THAN OCCURRED ON AVERAGE IN THE PAST 6 MONTS.

STRICTLY CONFIDENTIAL(FR) 5/11/73

CHART 1

RESERVES AVAILABLE TO SUPPORT PRIVATE NONBANK DEPOSITS BILLIONS OF DOLLARS

12% growth for Apr

i I J

F

7 M 1973

S 1971

D

M

J 1972

D

M

J

1973

*Break in Series, Actual Level of RPD After Reduction in Reserve Requirements £ffective November 9, 1972

"t"

i A

M

CHART 2

STRICTLY CONFDENTIAL (FR)

5/11/73

MONETARY AGGREGATES NARROW MONEY SUPPLY M1

BILLIONS OF DOLLARS

6% growth for Apr

4% growth

I

i

BROADER MONEY SUPPLY M2

6/ 2% g'oth for Apr

i II

N D 1972

1971

1972

1973

J

F

I /i

M A 1973

M

CHART 3

STRICTLY CONFIDENTIAL (FR)

5/11/73

MONETARY AGGREGATES BILLIONS OF DOLLARS /428

ADJUSTED CREDIT PROXY

2

-420

(5/9/73)

- 400

TOTAL RESERVES

-7)

1971

1972

* Bleak m sertes Actual Level of T1cal

Reserves

1973

J

F

M A 1973

M

After Reauction in Reserve Requiremen s Ettective November 9 1972

CHART 4

MONEY MARKET CONDITIONS AND INTEREST RATES CONDITIONS PER CENT

1971

1972

INTEREST RATES Long-term

INTEREST RATES Short-term

1973

PER CENT

FWEEKLY AVERAGES

1971

1972

3

WEEKLY

1971

1972

1973

TARLE

STRICTLY CONFIDENTIAL ---------------------

1

MAY 11,

BANK RESERVES (ACTUAL AND CURRENT PROJECTIONS) --------------------------------------------------

m--------

----------------------------------------------

m--m-----

1)

ARGRFGATE RESFRVFS I RFQUIRED RESERVES ---------------------II--------------------------------------II SEASONALLY AIJUSTEO -------------------------------------------------------------------------II-------------------------------TOTAL NONRORROWEn I PRIVATF nTHFW CU'S AND SEAS ADJ I NON SFAS. ADJ t RESFRVES RESERVES I OFMANn TIMF nEP NON DEP I RESERVES AVAILABLE FOR S PRIVATE NONRANK DEPOSITS

PERIOD

S MONTHLY LEVELS-SMILLIONSI ------------------------I 1973--JAN. 1 FEB. MA. APR. MAY

(1)

29.411 29.296 29*622 29.869 (30014)

I

1

(2)

30.384 29.369 29.360 29.902 (29851)

I ANNUAL RATES OF CHANGE --------------------QUARTERLYt -- *- - -I 1972--4TH OTR.

II I

I 1

1973

(3)

II II 9I 11

(1 9I i9 II I I

(4)

(5)

( )

GOV T AND INTERRANK

(7)

(8)

I I 32.242 31.649 319999 329335 (32.409)

30.848 299787 29.526 30,178 (30.290)

I

19.248 19.031 199021 18.870 (189943)

7.646 7.674 7.707 7.777 ( 79854)

29253 2.384 2v669 29970 ( 3.087)

2.832 2.353 2377 2.466 (

2.396)

11

10.6

14.2

4,8

8.3

11.4

23.1

SII 1973--ST OTR. 2ND OTR. MONTHLYS 1973--JAN. FEB. MAR. APR. MAY APR.-MAY

I I I I

10.5 10.0)

APR.

MAY

7 14 21 28

(

22.8 *.7 13.4 10.0 6.0)

I

(

8.0)

4 11 18 25 2 9

1 1 1 1

1 1 I

I

8.8 5.0)

1

-7.1 16.5)

29167 29.111 299671 29.235

1 9 1 I I

I 1

29.591 29.314 29.657 28.917

1 29.407 28.952 29.503 29,316

29.850 29.296 29.676 29.451 30.128 29366 29.831 309097 30.102 29.515

I 1

1 I 1

29.972 29.136 29.939 30.244 30.390 29.699

It 1 99 11 11 11

11 11 11 11 11 11 II 91 II 11 II

I

2.9 0.5)

(

90.2 80.0)

(

13.5 4.4 5.2 10.9 12.0)

(

41.3 69.8 143.5 135.3 47.5)

(

11.5)

(

94.0)

(

7.7 q.5)

23.2 -13.5 -0.6 -9.S ( 4.5) -2.4)

( 1 I

99

I

1 MAR.

( 1

1 1 1 I

YEEKLY LEVELS-SMILLIONS ----------------------I 7 FEB. 14 I 21 1 28

I

35.8 -22.1 13.3 12.6 3.0) 7.5)

31.3 -41.3 -10.5 26.5 ( 4.5) (

1

15.b)

19.046 180957 19.143 189979

7.r70 7.6o8 7.646 7.%92

2.288 2.338 2.430 2.478

2.442 2.457 2.274 2.241

199243 18.953 199033 189P57

79686 7.693 7.773 7.713

2.524 2.603 29.71 2.799

2.455 29422 2.331 29248

30.579 299319 29.219 30.897

19.01? 18.767 18.909 18.781

7.742 7.769 7,758 7.761

2.850 29910 2o982 3.055

2.O01 29472 2.689 2,359

30.412 29.811

18.971 18.84?

7.468 7*416

3.011 390t2

2*269 2.797

319608 31.568 31.945 31.476

30.24 29,511 29.7A7 29.530

32.305 319718 32.006 31.699

30.238 29.148 28.679 2.350

32.628 31.838 32.519 32.4*6 32.371 32.312

1 1

1

------------------------------------------------------------------------------------------------------------------------------------NOTEs DATA SHOWN IN PARENTHESES ARE CURRFNT PROJFrTIONS. 1/ AT THE FOMC MEETING APRIL 17. 1973 THE COMMITTEE AGREED ON A RPn RANAF OF 10 TO 12 PFM ChNI.

TABLE 2

STRICTLY CONFIDENTIAL ---------------------

MONETARY AGGREGATES (ACTUAL AND CURRENT PROJECTIONS, SEASONALLY

-----------------------------

MAY 11, ADJUSTED)

m---me mmmemmmemmmemmemmmmmememmmmmmmmmmmmmmmmmmmmmmmmm--------mm--m---------mwm-

I I PERIOD I -- -- - -- - -- - -I I MONTHLY LEVELS-SRILLIONSI ----**------------* I 1973--JAN. FEB. MAR. APR. MAY

1 PERCENT ANNUAL GROWTH -------------------QUARTERLY --------1972--4TH QTR.

I I I I

1973--IST OTR. 2ND OTR.

I I

MONTHLY ------1973--JAN. FEB. MAR. APR. MAY

1.7 1 6.0)

I

I I I

I I I

1 I

-0.5 6.1 -. 5 7.9 ( 5.5)

I

( 7.0)

I FEB.

MAR.

APR.

7 14 21 28

I

7 14 21 28

1

I

I I I

4 I 11 18 1 25 PI 2

I I 6.4 5.9 4.7 8.3 ( 8.0)

I

( 8.0)

I

8.3 16.4 19.7 13.7 ( 8.0)

529.0 530.4 532.3 530.3

257.6 256.1 257.5 256.0

533.0 531.7 533.7 532.8

418.8 419.9 423.2 423.6

534.1 534.1 537.9 535.6

426.0 424.1 425.8 426.8

411.3 413.0 417.5 417.2

I 257.5 257.5 258.9 257.0

I I

I

P

259.5

9 PEI I

258.9

429.5 428.2

538.5 538.8 I

1

I1

15.7 21.6 30.9 21.0 15.0)

(10.0)

(18.0)

( 9.5)

320.1 322.2 323.? 325.0

272.8 274.0 274.1 274.4

6.3 8.1 8.0

327.5 330.1 331.4 333.2

275.3 275.6 276.2 276.8

7.7 5.4 4.6 6.1

334.3 335.6 337.1 337.5

276.6 P76.6 279.0 278.7

6.8 5.8

338.3 339.7

279.0 ?79.9

r II If SI

(11.0)

I

I

9.5 ( 8.5)

I NONDEPOSIT I SOURCES OF I FUNDS - -- - -- I

I

4.5

I

*.5 4.9

5.1 ( 5.0)

I

II II

256.3 256.4 258.3 255.9

I MAY

I

23.1 (16.)

15.0 (11.5)

I

WEEKLY LEVELS-SRILLONS I

--------------------

5.7 ( 7.5)

I

1

APR.-MAY

MONEY SUPPLY I ADJUSTED II U.S. I TIMF AND SAVINGS OFPOSTTS NARROW I BROAD I CREDIT II GOVT. I I OTHER I (MI) I (M2) I PROXY II nEPOSITS I TOTAL I THAN CD S I rD S - -- - -- - -- - -- m - -- - -- - -- - -- - -- - -- - -- -- - -- - -- - -- - -(1) (2) (5) (6) (3) II (4) (7) I II I II II 255.4 527.9 I 409.2 1I 7.1 316.9 272.5 *A 44.4 256.7 530.5 414.8 i8 7.2 I 322.6 273.8 I 48.8 256.6 532.6 421.6 330.9 276.0 i4.9 1 7.5 I 258,3 536.3 426.4 5.8 II 336.7 278.0 58.7 (259.5) (539.8) (429.2) I1 ( 4.8) (340.9) (20.3) (60.6) I II I II I II I I I 8.6 10.2 12.1 II 14.4 11.6 I

II II II I II II I 1 II I1 11 II I 1 II f II II

5.5 6.9 8.6 7.9 7 0

I

12.9 5.7 9.6

I

I

I

I I I

47.3 48.? 49.1

I

'O.7

1

4.4

I 1 I 1

4.4 4.7 4.8 5.0 4.9 5.0

52.2 54.5 95.2 56.3 %7.7

I

4.5

4.9

59.0

1

58.1 98.f

I

59.3 59.

I

I

4.9 5.2 5.4 5.2 4.9

I

NOTEI DATA SHOWN IN PARENTHESES ARE CUPRFNT PROJECTIONS.

P - PRELTMINARY PE - PARTTALLY ESTIMATED ANNUAL RATES OF CHANGE OTHER THAN THOSF FOR THF PAST ARE ROUNDEb TO THF NEAFRST HALF PERCENT.

-- - -- - -- - - -- - -- - -- - - -- - -- - - -- - -- - -- - - -- - --

- - - -- - -- - - -- - -- - -- - - -- - -- - -

1973

STRICTLY CONFIDENTIAL (FR) MAY

11,

1973

Table 3 RESERVE EFFECTS OF OPEN MARKET OPERATIONS AND OTHER RESERVE FACTORS (Millions of dollars, not seasonally adjusted)

Period

Bills & Accept.

(1)

Open Market Operations 1/ Coupon Agency RP's 3/ Issues Issues Net -

(2)

(3)

(4)

Total

Daily Average Reserve Effect 2/ Open Market A Member Other 4/ Operations Bank Borrowing Factors

A in reserve categories req. res. against available res.5/ U.S.G. and interb. (6)+(7)+(8)-(9)

ATarget available reserves

(5)

(6)

(7)

(8)

(9)

(10)

(11)

Monthly 1972 --

1973

Nov. Dec.

-548 450

-51 -135

157 134

-147

-442 596

-226 - 25

32 443

-1,835 839

-651 - 78

-1,378 343

-1,520 300

- Jan. Feb. Mar. Apr.

1,336 659 1,109 1,332

-196 -207

-18 -14 -19

862 -193 542 -414

2,197 644 1,636 1,106

1,116 146 1,689 1,323

117 428 265 -137

376 -1,794 -1,723 -884

278 -109 156 -74

1,331 -1,111 75 376

995 -1,140 40 505

May

200

June

Weekly 1973 --

I/ 2/ 3/ 4/ 5/

--

--14 --- -1,856 1,827 -1,686 2,112

-2,015 2,259 -1,245 2,159

781 293 376 154

206 -197 648 -126

-215 -599 -617 -319

282 - 48 -144 -104

490 -455 551 -187

443 243 309 201

-207

-- 8 --

-1,212 -379 2,385 -2,020

-769 -144 2,694 -1,612

998 -572 743 266p

-259 -252 343 -199p

209 - 36 -221 3 - 87p

292 - 24 62 -477p

656 -836 803 157p

--

-16 --

646 -41

1,102 368

467p 400p

22 8

472 409

p -386p

- 73p -316p

-llOp 647p

13 p -949p

Mar.

7 14 21 28

-159 446 441 47

Apr.

4 11 18 25

May.

2 9 16 23 30

6

2

auctions. Represents change in System a portfolio from end-of-period to end-of-period; includes redemptions in regular bill Represents change in daily average level from preceding period. Includes matched sale-purchase transactions as well as RP's. Sum of changes in vault cash, currency in circulation, Treasury operations, F.R. float, gold and foreign accounts, and other FR accounts. Target change for April and May reflects the target adopted at the April 17, 1973 FOMC Reserves to support private nonbank deposits. Target change for previous months reflects the bluebook patterns that are consistent with target ranges that were adopted during meeting. the month.

STRICTLY CONFIDENTIAL (FR) MAY 11, 1973

Table 4 SECURITY DEALER POSITIONS AND BANK POSITIONS Millions of Dollars U. S. Govt. Security Dealer Positions

Period

Bills

(1) 1972

Coupon Issues

(2)

Other Security Dealer PositionsMember Corporate Bonds

Municipal Bonds

Member Bank Reserves Positions Bank Reserves Positions Excess Reserves

Borrowings at FRB Total Seasonal

(4)

Basic Reserve Deficit 8 New York | 38 Other

(8)

(9)

--

High Low

4,291 1,916

-1,585 -93

383 40

1,223 12

-5,635 -1,638

-5,270 -1,910

1973 --

High Low

3,718 1,683

1,125 -96

244 55

2,139 688

-5,243 -1,820

-7,093 -4,839

1972 --

Apr. May June

2,612 2,792 2,694

274 675 205

136 104 204

109 119 94

-3,026 -2,625 -2,828

-3,299 -2,652 -2,864

July Aug. Sept.

2,262 2,643 4,099

97 692 170

147 255 162

202 438 514

-2,945 -3,913 -3,835

-2,603 -2,801 -4,024

Oct. Nov. Dec.

2,887 3,096 3,510

207 1,039 953

247 314 219

574 606 1,049

-3,637 -4,561 -4,977

-4,044 -3,622 -4,958

Jan. Feb. Mar.

3,407 2,132 2,490

720 562 -50

342 205 295

1,165 1,593 1,858

-4,550 -4,187 -4,273

-5,469 -5,436 -5,847

Apr.

*2,457

-3,293

-6,577

1973 --

1973 --

Notes:

*106

341 23 249 93

1,688 1,491 2,139 2,013

-3,760 -4,883 -4,719 -4,062

-6,235 -5,920 -6,075 -5,269

72 190 *104 * 12

537 -86 234 388p

1,754 1,502 1,845 1,646p

-3,577 -4,227 -4,121 -2,392

-5,933 -7,093 -6,676 -6,908

*221 *809

215p -151p

1,874p 1,488p

-1, 0p -3,465p

Mar.

7 14 21 28

1,976 1,973 2,740 3,028

11 -73 -96 -83

Apr.

4 11 18 25

3,142 2,549 *2,477 *2,222

May

2 9 16 23 30

*1,969 *1,788

82

Government Security dealer trading positions are on a commitment basis. Trading positions, which exclude Treasury bills financed agreements maturing in 16 days or more, are indicators of dealer holdings available for sale over the near-term. Other security are debt issues still in syndicate, excluding trading positions. The basic reserve deficit is excess reserves less borrowing at less net Federal funds purchases. Weekly data are daily averages for statement weeks, except for corporate and municipal issues which are Friday figures. *STRICTLY CONFIDENTIAL

74

-5,5 p 5 75 5 - , p

by repurchase dealer positions Federal Reserve in syndicate

CONFIDENTIAL (FR)

MAY 11, 1973

Table 5 SELECTED INTEREST RATES Per Cent

Period

Federal Funds (1)

Treasur 90-day (2)

bills -year (3)

Slort-term______ 90-119 day Commercial Paper (4)

CD's Prme - N 90-119 day 60-89 day (5)

(6)

ll

Aaa Ut ht New Recently Offered Issue (7) (8)

Municipal Bond Buyer (9)

. arm U.S. Government Constant (10-yr. Maturt

F

(10)

Auction Yields ds (11)

1972 --

High Low

5.38 3.18

5.13 3.03

5.52 3.60

5.50 3.75

5.38 3.13

5.50 3.50

7.60 6.99

7.46 7.12

5.54 4.96

6.58 5.87

7.72 7.54

1973 --

High Low

7.60 5.61

6.44 5.15

6.71 5.42

7.13 5.63

7.25 5.38

6.75 5.50

7.52 7.29

7.60 7.26

5.35 5.00

6.80 6.42

7.92 7.69

1972 -- Apr. May June

4.17 4.27 4.46

3.71 3.69 3.91

4.65 4.46 4.71

4.55 4.45 4.60

4.34 4.15 4.38

4.47 4.33 4.50

7.45 7.38 7.32

7.40 7.38 7.36

5.43 5.31 5.34

6.19 6.13 6.11

7.58 7.63 7.63

1973 --

1973 --

July

4.55

3.98

4.90

4.83

4.63

4.75

7.38

7.37

5.41

6.11

7.63

Aug. Sept.

4.80 4.87

4.02 4.66

4.90 5.44

4.75 5.07

4.65 4.88

4.78 5.00

7.37 7.40

7.34 7.42

5.30 5.36

6.21 6.55

7.63 7.65

Oct. Nov. Dec.

5.04 5.06 5.33

4.74 4.78 5.07

5.39 5.20 5.28

5.21 5.18 5.40

5.00 5.00 5.19

5.19 5.13 5.38

7.38 7.09 7.15

7.38 7.18 7.18

5.19 5.02 5.05

6.48 6.28 6.36

7.72 7.71 7.68

Jan. Feb. Mar.

5.94 6.58 7.09

5.41 5.60 6.09

5.58 5.93 6.53

5.76 6.17 6.76

5.63 6.16 6.78

5.75 6.28 6.75

7.38 7.40 7.49

7.35 7.41 7.51

5.05 5.13 5.29

Apr.

7.12

6.26

6.51

7.13

7.04

6.75

7.48p

7.

5.15

6.46 6.64 6.71 6.67

7.69 7.72 7.78 7.89

Mar. 7 14 21 28

7.02 7.13 6.96 7.11

5.83 5.92 6.25 6.28

6.27 6.44 6.69 6.64

6.40 6.65 6.88 7.00

6.63 6.63 6.88 7.00

6.75 6.75 6.75 6.75

-7.52 7.45 --

7.50 7.60 7.53 7.44

5.27 5.34 5.35 5.26

6.67 6.72 6.76 6.71

7.75

Apr. 4 11 18

7.18 6.84 7.23

6.44 6.26 6.18

6.71 6.43 6.41

7.08 7.13 7.13

7.13 7.00 7.00

6.75 6.75 6.75

7.51 --- 7.43 7.47 7.52

5.22 5.07 5.17

6.70 6.64 6.64

7.86

25

7.14

6.22

6.57

7.13

7.05

6.75

7.45

7.42

5.14

6.68

2 9 16 23

7.43 7.60

6.24 6.10

6.57 6.52

7.13 7.13

7.25 7.25

6.75 6.75

7.40 --

7.42 7.45p

5.10 5.10

6.75 6,80p

May

30 Notes:

___

48

p

__

Weekly data for columns 1 to 4 are statement week averages of daily data. Columns 5 and 6 are one-day Wednesday quotes. For columns 7, 8 and 10 the weekly date is the mid-point of the calendar week over which data are averaged. Column 9 is a one- day quote for the Thursday following the end of the statement week. Column 11 gives FNMA auction data for the Monday preceding the end of the stat ement week. The FNMA auction yield is the yield in the bi-weekly auction for short-term forward commitments for Government underwritten mortgages.

7.81

7.89 7.92

Appendix Table I CONFIDENTIAL

(FR)

RESERVES AND MONETARY VARIABLES May 11, 1973 Money Stock Measures

Reserves

Period

Total (1)

(2)

Available to Support Pvt. Depoits (3)

)Nonborrowed 2 (4) (5)

. (6)

Bank Credit Measures Adjusted Total Credit Loans and . ProxV Investents (7) (8)

Time Total Other than Time . 's (9) (10)

Other Thrift Institution Depets (11)

(Per Cent Annual Rates of Growth)

.

's (12)

Nondeposit ts (13)

U.S. Gov't. D fd (14)

(Dollar Change in Billions)

Annually:

+7.5 -1.1 +6.1 +7.2 +10.6

+5.3 -2.8 +9.6 +8.1 +7.1

1st Half 1971 2nd Half 1971

+9.7 +4.4

Ist Half 1972 2nd Half 1972

1968 1969 1970 1971 1972

+8.1 -1.7 +8.6 +7.2 +9.7

+7.8 +3.6 +6.0 +6.6 +8.3

+9.3 +2.6 +8.4 +11.4 +10.8

+8.3 +2.9 +8.0 +13.5 413.0

+9.5 +0.4 +8.2 +9.4 +11.6

+11.0 +3.9 +8.1 +11.3 +14.0

+11.5 -4.8 +17.9 +18.2 +15.5

+11.2 +1.4 +11.1 +16.7 +13.3

+6.4 +3.5 +7.7 +17.5 +16.8

+2.9 -12.4 +14.4 +7.7 +10.1

+2.6 +13.0 -8.4 -7.6 +0.4

+9.6 +6.3

+10.7 +3.4

+10.1 +3.0

+14.9 +7.4

+16.4 +9.8

+10.1 +8.4

+11.5 +10.6

+21.6 +13.4

+20.0 +12.1

+19.6 +14.0

+4.3 +3.4

-7.1 -0.4

-1.4 +1.1

+11.7 +9.0

+12.1 +2.0

+8.6 +10.6

+7.7 +8.5

+10.8 +10.3

+13.0 +12.1

+11.4 411.1

+12.8 +14.2

+15.4 +16.5

+13.7 +12.1

+17.3 +15 0

+4.4 +5.7

-0.3 +0.6

+0.4

+6.5 +2.3

+6.6 +6.0

+3.2 +3.6

+4.1 +1.9

+6.0 +8.7

+8.9 +10.5

+6.7 +9.8

+9.7 +11.1

+9.8 +16.6

+8.0

+14.2 +13.3

+1.7 +1.8

-0.4

+1.1

+15.9

1972 1972 1972 1972

+10.4 +12.6 +3.6 +14.2

+10.7 +13.1 -0.8 +4,8

+10.4 +6.6 +9.9 +10.6

+9.2 +6.1 +8.2 +8.6

+12.7 +8.5 +10.3 +10.2

+14.9 410.7 +12.4 +11.5

+11.0 411.5 +9.8 +12.1

+15.7 +9.5 +13.6 +14.4

+15.4 +14.8 +14.0 +14.4

+16.1 +10.8 +12.3 +11.6

+19.7 +14.3 +16.2 +13.2

+0.8 +3.7

-0.3

+2.4 +3.3

+0.4 +0.3

-0.4 +0.5 -1.1 +1.4

1st Qtr. 1973

+8.8

-7.1

+10.5

41.7

+5.7

+ 8.6

+15.0

+20.3

+23.1

+9.5

+11.7

+0.5

+0.9

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.

+21.8 -5.2 +14.5 +22.1 +8.8 +6.4

+26.7 -5.7 +11.0 +21.7 +9.4 +8.0 +2.9 +0.7 -6.1 +15.5 +9.8 -10.9

+11.0 +6.5 +13.4 +6.8 +3.9 +9.0 +6.9 +9.7 +12.9 +3.2 +20.8 +7.7

+1.0 +14.7 +11.5 +8.0 +4.0 +6.4 +12.7 +4.4 +7.2 +7.2 +5.2 +13.3

+10.4 +15.1 +12.4 +7.9 +8.3 +9.2 +12.5 +9.3 +8.7 +10.1 +7.9 +12.2

+13.2 +16.8 +14.2 +10.7 +10.1 +11.1 +13.9 +11.6 +11.2 +12.0 + 9.8 +12.4

+9.2 +7.2 +16.2 +12.2 +15.6 +6.6 +10.0 +9.6 +9.5 +11.9 410.5 +13.4

+14.2 +12.4 +19.9 +5.4 +20.0 +2.3 +10.2 +18.3 +11.9 +11.4 +20.6 +10.7

+17.7 +16.2 +11.6 +12.8 +18.2 +12.9 +13.6 +15.9 +12.0 +11.5 +14.2 +17.1

+19.2 +15.4 +13.2 +7.8 +13.0 +11.4 +12.3

-0.1 -0.3 +0.1 -0.2 +0.2

+0.2 -1.7 +1.1 +1.1

Jan. Feb

+35.8 -22.1 +13.3 +12.6

+31.3 -41.3

+22.8 -4.7 +13.4 +10.0

-0.5 +6.1 -0.5 +8.0

+6.4 +5.9 +4.8 +8.3

+9.8 +9.0 +6.9 +8.3

+8.3 +16.4 +19.7 +13.7

+18.6 +21.9 +19.4 +6.4

+15.7 +21.6 +30.9 +21.0

-0.6 +0.5 +1.1 -0.3 +0.4

Semi-Ahnually*

Quarterly: 3rd Qtr. 1971 4th Qtr. 1971 let 2nd 3rd 4tb

Qtr. Qtr. Qtr. Qtr.

1972:

1973:

Mar. Apr.

NM TE

+5.2

+7.6 -1.9 +18.2 +11.4 +12.5

-10.5 +26.5

Reserve requirements of Eurodollar borrowtlgs are included begifhing October 16, October 1, 1970. p - Prel tinary.

1969, am

+13.6

+0.1

+10.2 +12.8 +10.4 +11.2

+23.3 +16.6 +18.2 +13.4 +21.6 +16.9 +16.7 +14.9 +16.3 +14.5 +12.3 +12.5

+12.9 +5.7 +9.6 +8.7

+19.4 49,1 +11.7 +5.0

+14.0

requireents on batik-related

+0.6 +0.1

+1.5 +1.5 +0.7

+0.7

+0.1 +0.3 -0.1 40.2

-1.3 -1.0 -0.7 +0.6 +1.2 +0.6

+1.9

+0.1

-0.4

+1.2 +4.5 +6.1 +3.8

+0.1

+0.5 +0.2 +0.2 -1.6

+0.8 +0.8 +0.8 +0.2 +1.2

+0.4 +0.2

conaercial paper are itcluded beginning

Appendix Table II

CONFIDENTIAL (FR) May 11, 1973

RESERVES AND MONETARY VARIABLES (Seasonally adjusted, billions of dollars)

Period Annull y: Dec. 1968

Total 1l)

oonborro ()

Dec.

1969

Dec.

1970

27,219 27.959 29,121

Bank Credit Measures Adjusted Tota Credit Loans and Total Proxy Inveatmente Time (0)' (8) (9)

loney Stock Measures

Reserves Available to Support Pvt. Depoits

otl Total

t. Prt.

e.

3

2

(3)

(4)

(5)

26,416 26,699 28,727

24,791 25,339 26,975

201.6 208.8 221.3

158.2 162.7 172.2

382.5 392.3 425.2

(6)

(7) 577.2 594.0 641.3

306.6 307.7 332.9

390.6 406.0 438.9

Time Other than CD's

lit)

Other Thrift Institution Deposts

Cs ( ii (13)

180.9 183.5 203.9

194.7 201.7 216.1

23.3 10.9 25.3

Deposit Fuds

7.0 20.0 11.6

-Dec.

31,209

31,060

26,907

236.0

183.4

473.8

727.7

364.3

488.6

270.9

237.9

253.8

33.0

4.90

1972--Jan. Feb. Mar.

31,776 31,639 32,021

31,751 31,601 31,891

29,172 29,329 29,656

236.2 239.1 241.4

183.3 185.8 187.7

477.9 483.9 488.9

735.7 746.0 754.8

367.1 369.3 374.3

494.4 499.5 507.8

274.9 278.6 281.3

241.7 244.8 247.5

257.8 262.1 265.9

33.2 33.7 33.8

4.0

Apr. May June

32,612 32,852 p3,027

32,467 32,720 32,938

29,824 29,920 30,144

243.0 243.8 245.1

189.1 189.6 190.7

492.1 495.5 499.3

761.5 767.9 775.Q

378.1 383.0 385.1

510.1 518.6 519.8

284.3 288.6 291.7

249.1 251.8 254.2

269.4 272.4 275.7

35.2 36.8 37.5

3.5 3.7 3.8

July Aug. Sept.

33,171 3,381 3,327

33,018 33,038 32,870

30,317 30,562 30,890

247.7 250.1

193.1 193.8 194.8

504.5 508.4 512.1

784.0 791.6 799.0

388.3 391.4 394.5

524.2 532.2 537.5

295.0 298.9 301.9

256.8 259.8 262.0

279.6 283.2 286.9

38.3 39.1 39.8

3.9 4.2 4.1

Oct. Nov. Dec.

S3,832 )1,883 B1,309

33,295 31,297 30,063

30,973 29,496 28,862

251.6 252.7 255.5

195.9 196.5 198.7

516.4 519.8 525.1

807.0 813.6 822.0

398.4 401.9 406.4

542.6 551.9 556.8

304.8 308.4 312.8

264.8 267.1 269.6

290.6 293.8 296.9

40.0 41.2 43.2

4.3 4.3 4.4

1973--Jan. Feb.

2,242 1~,649 1,999 32,335

30,848 29,787 29,526 30,178

29,411 29,296 29,622 29,869

255.4 256.7 256.6 258.3

198.4 199.3 198.7 199.7

527.9 530.5 532.6 536.3

828.7 834.9 839.7 845.5

409.2 414.8 421.6 426.4

565.4 575.7 585.0 588.1

316.9 322.6 330.9 336.7

272.5 273.8 276.0 278.0

300.8 307.0 309.2

44.4 48.8 54.9 58.7

4.5 4,5 4.9 5.1

272.0 271.6 272.8 272.7 273.4

Mar. Apr.

Weekly: 1973--Jan.

Feb.

Mar.

Apr.

May

248.6

3 10 17 24 31

1,959 1,898 3,245 1,791 2,158

29,886 31,007 31,720 30,537 30,576

29,367 29,241 29,915 28,958 29,548

258.2 254.6 255.7 255.0 254.3

200.8 197.4 198.7 198.0 197.6

530.2 526.2 528.5 527.8 527.7

409.8

315.5 315.6 316.7 317.3 318.9

7 14 21 28

1,608 31,568 31,945 31,476

30,284 29,511 29,767 29,530

29,167 29,111 29,671 29,235

256.3 2564 258.3 255.9

198.9 199.0 200.6 198.6

529.0 530. 532.3 530.3

411.3 413.0 417.5 417.2

320.1 322.2 323.2 325,0

272.8 274.0 274.1 274.4

7 14 21 28

32,305 1,718 32,006 1,699

30,238 29,148 28,679 29,350

29,850 29,296 29,676 29,451

257.6 256.1 257.5 256.0

199.8 198.3 199.5 198.1

533.0 531.7 533.7 532.8

418.8 419.9 423.2 423.6

327.5 330,1 331.4 333.2

275.3 275.6 276.2 276.8

4 11 18 25 p

32,628 31,838 32.519 2,456

30,579 29,319 29,219 30,897

30,128 29,366 29,831 30,097

257.5 257.5 258.9 257.0

199.3 198.9 200.2 198.1

534.1 534.1 537.9 535. 6

426.0 424.1 425.8

426.8

334.3 335.6 337.1 337.5

276.6 276.6 279.0 278.7

2,371

30,412

30,

259.5

200.9

538,5

429.5

338.3

279.0

2

p

102

... .... ... . ..

p -

.....

::::::::::::::::::::

3.6 3.7

4.4

4.1 4.6 4.7 4.7

ilil ............. 4.5

!i! .................. 4.4 .......................

:

4.4 4.7

4.8 ...................... i 5.0 ::::::: ............ 4.9 ............. !ii:ii: 5.0

i::! '. ............

4.9 4.9 5.2

: :': t ; t:' t:;':

..........

NOTE:

412.0 407.4 409.4 409.1

394.4

U.S. Gov't. Demand

....... ...

on bank-related commercial paper are included beginning Reserve requirements on Euro-dollar borrowings are included beginning October 16, 1969, and requirements bank-related commercial paper, and Euro-dollar requirements, reserve to subject deposits bank member total mainly includes October 1, 1970. Adjusted credit proxy daily averages except for nonbank commercial paper figures which are data Monthly weeks. statement for averages daily are data Weekly banks. borrowings of U.S. total loans and investments and thrift institution deposits. Weekly data are not available for M3 , are for last day of month.

Preliminary.