bluebooks · November 4, 1986

Bluebook

Prefatory Note

The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that this document may contain occasional gaps in the text. These gaps are the result of a redaction process that removed information obtained on a confidential basis. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act.

In some cases, original copies needed to be photocopied before being scanned into electronic format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing). 2 A two-step process was used. An advanced optimal character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff.

October 31, Strictly Confidential (FR)

1986

Class I FOMC

MONETARY POLICY ALTERNATIVES

Prepared for the Federal Open Market Committee By the staff

Board of Governors of the Federal Reserve System

STRICTLY CONFIDENTIAL (FR) CLASS I - FOMC

October 31,

1986

MONETARY POLICY ALTERNATIVES Recent Developments (1)

M2 and M3 increased at annual rates of 8-3/4 and 7-1/2 percent

respectively on average over September and October, well below their rates of growth through the spring and summer.

Both aggregates were within the Commit-

tee's 7 to 9 percent range for the August-December period, and in October were very close to the upper ends of their 6 to 9 percent annual growth cones.

growth, while still quite strong at a 12-1/2 percent rate over September and October, was down substantially from its average over the previous several months . (2) The slowing in M2 growth reflected in part weakness in its overnight RP component relative to previous months, when if had been boosted to finance unusually sizable acquisitions of government securities; variations in this component largely accounted for the more marked slowing in M2 growth in September and moderate rebound in October.

Expansion in the sum of the

other components of M2 also decelerated somewhat over the September-October period.

Shifts from time deposits into the more liquid interest-bearing re-

tail components of M2 persisted in September and appear to have intensified in October.

Offering rates on time deposits have adjusted relatively promptly

to earlier declines in market rates, while rates on NOW and savings accounts have continued to adjust only sluggishly.

Inflows to OCDs have remained very

strong, and most of the slowing of M1 growth on average over the two months was accounted for by a sharp deceleration of its demand deposit component.

KEY MONETARY AGGREGATES (Seasonally adjusted annual rates of growth)

OctoberP

August to OctoberP

QIV' 85 to OctoberP

August

September

20.8

9.9

14.9

12.5

11.1

7.4

10.0

8.8

9.0

8.9

8.8

6.3

7.5

8.9

Domestic nonfinancial debt

12.5

12.0

n.a.

Bank credit

13.8

11.5

3.4

7.4

9.0

Ncnborrowed reserves 2

18.8

10.9

16.6

13.8

19.9

Total reserves

19.7

11.6

13.4

12.6

18.2

Monetary base

12.0

5.5

11.3

8.4

9.5

407

438

3123

739

729

7173

Money and credit aggregates 14.4

12.61

Reserve measures

Memo:

(Millions of dollars) Adjustment and seasonal

borrowing Excess reserves

p - Based on partial data for October. n.a. - Not available.

1. QIV 1985 to September. Includes "other extended credit" from the Federal Reserve. 2. 3. Based on data through the reserve maintenance period ending October 22. NOTE: Monthly reserve measures, including excess reserves and borrowing, are calculated by prorating averages for 2-week reserve maintenance periods that overlap months. Data incorporate adjustments for discontinuities associated with implementation of the Monetary Control Act and other regulatory changes to reserve requirements.

However, demand deposit growth strengthened a bit over October, contributing to a rebound in M1 growth from around 10 percent in September to 15 percent in October.

Large CDs ran off over the two months; the decline has been

especially pronounced in October, when bank credit growth slowed abruptly, leading to a further moderation in M3 growth estimated for this month. (3)

The debt of domestic nonfinancial sectors rose in September

at about a 12 percent rate, close to its pace for the first three quarters of the year, but has shown signs of slowing in October.

Growth in September was

buoyed by the temporary surge in automobile financing.

Mortgage lending evi-

dently has continued brisk over the two months in association with a robust pace of activity in the single family home market. to the slowing in consumer credit, by the debt ceiling.

In October, in addition

federal government borrowing was constrained

Business borrowing was subdued in September, but appears

to have picked up somewhat in October with a rebound in both bond offerings and short-term borrowing.

Borrowing in tax-exempt markets dropped sharply

following the September 1 effective date under the tax bill for restrictions on public-purpose borrowing; however, private-purpose borrowing has picked up in October following clarification of limits on issuance under the new law. (4)

Growth of nonborrowed and total reserves moderated somewhat

in September and October, reflecting the slower expansion of transactions accounts.

Reserve paths were constructed throughout the intermeeting period

assuming $300 million of adjustment plus seasonal borrowing.

Borrowing

averaged $324 million in the two complete maintenance periods since the last FOMC meeting; through the first eight days of the current period it has averaged $180 million.

With excess reserves in recent months running consis-

tently below levels of earlier this year, the path allowance was reduced to $850 million.

(5) Federal funds generally have continued to trade around 5-7/8 percent over the intermeeting period. Other interest rates have eased off somewhat on balance, with most short-term rates down about 5 to 20 basis points and bond yields as much as 30 basis points lower.

Stock prices have

firmed somewhat, retracing a portion of the declines of early September. Perceptions of stronger foreign demands for dollar assets-prompted in part by expectations of a cut in the Japanese discount rate, which was announced Friday-have contributed to recent increase in bond and stock prices.

The

Japanese action also was seen as giving the Federal Reserve more scope for an easing of policy domestically, although levels of short-term rates do not suggest widespread expectations of such a move in the near term. (6)

The dollar rose about 1-1/2 percent on balance on a weighted

average basis over the intermeeting period.

In the first part of the period

the dollar had continued to move lower, particularly against the German mark as it became clear that the Bundesbank would not act to lower interest rates and as economic activity in Germany appeared robust.

Late in October, how-

ever, the dollar firmed substantially, first on reports of large shifts of funds by Japanese institutional investors out of yen and into dollar denominated assets, and later with the release of September U.S. trade figures, which were much better than market expectations, and the cut in the Japanese discount rate.

Policy alternatives (7)

The table below presents three alternative specifications

for growth of the monetary aggregates together with associated federal funds rate ranges. at the last meeting.

Growth rates are shown from the August base chosen More detailed data, including implied growth for

each alternative from September to December and from last year's fourthquarter base to the fourth quarter of this year, are shown on the table and charts on the following pages. (8)

With growth in the aggregates over September and October

at rates close to those contemplated at the last FOMC meeting, M2 and M3 would be expected to remain within the Committee's current 7 to 9 percent range for the August to December period and very close to the upper ends of their 1986 ranges under the reserve conditions assumed for each of the three alternatives.

Growth in M1, while remaining below the pace in the

spring and summer under all the alternatives, would be expected to expand at around a 14 percent rate for the year.

However, differences in reserve

conditions under the three alternatives would affect the trajectories of the aggregates entering 1987. Alt. A

Alt. B

9 7-3/4 13-1/2

8-1/2 7-1/2 12-1/2

3 to 7

4 to 8

Alt. C

Growth from August to December

M2 M3 Ml Associated federal funds rate range (9)

8 7-1/4 11-1/2 5 to 9

Alternative B assumes continuation of the current degree of

pressure on reserve postions, with adjustment plus seasonal borrowing at

Alternative Levels and Growth Rates for Key Monetary Aggregates M2

Levels in billions 1986-July August September October November December Monthly Growth Rates 1986-July August September October November December

Alt. A

Alt. B

Alt. C

Alt. A

Alt. B

Alt. C

Alt. A

Alt. B

Alt. C

2699.1 2724.1 2741.0

3375.1 3400.1 3424.9

676.1 687.8 693.5

2763.9 2781.6 2804.7

2763.9 2780.0 2800.2

2763.9 2778.4 2795.7

3442.8 3462.0 3486.9

3442.8 3460.9 3483.7

3442.8 3459.7 3481.2

702.1 710.9 719.0

702.1 710.2 716.8

702.1 709.5 714.5

12.8 11.1 7.4

13.0 8.9 8.8

16.7 20.8 9.9

10.0 7.7 10.0

10.0 7.0 8.7

10.0 6.3 7.5

6.3 6.7 8.6

6.3 6.3 7.9

6.3 5.9 7.5

14.9 15.0 13.7

14.9 13.8 11.2

14.9 12.6 8.5

6.1 4.3 10.4 11.2 8.8

6.1 4.3 10.4 11.2 8.5

6.6 7.5 9.0 10.1 7.5

6.6 7.5 9.0 10.1 7.4

6.6 7.5 9.0 10.1 7.2

10.7 7.7 15.8 17.4 14.5

10.7 7.7 15.8 17.4 13.9

10.7 7.7 15.8 17.4 13.4

Quarterly Ave. Growth Rates 1985-Q4 6.1 4.3 1986-Qi Q2 10.4 Q3 11.2 Q4 9.1 Aug. 86 to Dec. 86 Sept.86 to Dec. 86

8.9 9.3

8.4 8.6

7.9 8.0

7.7 7.2

7.4 6.9

7.2 6.6

13.6 14.7

12.6 13.4

11.6 12.1

Q4 85 to Oct. 86 Q4 85 to Dec. 86 Q4 85 to Q4 86

9.0 9.1 9.1

9.0 9.0 9.0

9.0 8.8 8.9

8.9 8.8 8.8

8.9 8.7 8.8

8.9 8.7 8.7

14.4 14.7 14.6

14.4 14.4 14.4

14.4 14.0 14.3

1986 Ranges:

6 to 9

3 to 8

1 ACTUAL AND TARGETED M2 CHART

BIll

onsofr dol are

2850

ACTUAL LEVEL -ESTIMATED LEVEL * SHORT RUN ALTERNATIVES

- 2800

9 2750

2700

'~2650

' .

•

2550 2500

o.'

25 .2600 *

2450 D

ON 1985

J J 1986

CHART 2

ACTUAL AND TARGETED M3 B 111 one of do Ilara

1 3600

--*

ACTUAL LEVEL ESTIMATED LEVEL SHORT RUN ALTERNATIVES

-1 3500

-- 3400

3300

3200

N 1985

J J 1986

3100 D

CHART 3

ACTUAL AND TARGETED M1 B11 I ons of doIlare 740

-730 A- 720

ACTUAL LEVEL --- ESTIMATED LEVEL . SHORT RUN ALTERNATIVES

-710 -700 -690 -680 -670 -660 -650 -

a.'

640

-630 - 620 S610 I

N 1985

J J 1986

600

Chart 4

DEBT Billi ons of do II re

1 7700

ACTUAL LEVEL

-- 7500

-- 7300

7100

6900

6700

SN 1985

J 1986

6500

the discount window around $300 million.

Federal funds are likely to re-

main near 5-7/8 percent and the Treasury bill rate in the vicinity of 5-1/4 percent. levels.

Bond yields also would be expected to fluctuate around current These rates might be especially sensitive to changing perceptions

of foreign demands for U.S. securities and accompanying movements in the dollar on foreign exchange markets through the upcoming period of auction and distribution of the Treasury's mid-quarter refunding issues.

And

credit market participants are likely to be watching developments in the oil market particularly closely, given the uncertainty about future price movements.

Mortgage rates might continue to edge down relative to Treasury

bond yields as concerns about accelerated repayments ebb further in a relatively stable interest rate environment.

The dollar is expected to

drift lower, retracing its recent gains, in light of the continuing large U.S. current account deficit. (10)

M2, under alternative B, is expected to expand at an 8 per-

cent rate over November and December, a little below the average pace of September and October and appreciably slower than over the summer months. This growth would leave M2 right at the upper end of its 6 to 9 percent longrun range.

M2 growth over the remainder of the year should be restrained by

diminishing effects of earlier declines in market rates, and perhaps even some increase in opportunity costs as depository institutions lower offering rates on liquid retail deposits.

The prospects for a substantial slowing

of retail deposit growth, however, are limited by a continued reluctance on the part of many depositories to breach the former regulatory ceilings of 5-1/2 percent on savings accounts and 5-1/4 percent on ordinary NOW accounts. M2 growth in the fourth quarter would continue to exceed the expansion of income, although by a little smaller margin than in the third quarter.

The

specifications of alternative B imply a 5 percent rate of decrease in M2 velocity in the fourth quarter, given the staff GNP forecast, bringing the drop in velocity for the year to an historically large 4 percent.

(11)

Growth of M3 under alternative B also would be expected to

slow slightly further over November and December, coming in a little below the 9 percent upper limit of its long-term range.

Issuance of managed

liabilities over the balance of the year is expected to be modest as the Treasury rebuilds its cash balance at banks and as bank acquisitions of securities remain below the unusually rapid pace over the summer months. The use of purchased funds by thrifts may remain light if these institutions continue to sell a large portion of their substantial mortgage originations in the market.

On a quarterly-average basis, M3 growth for the fourth

quarter would be about 7-1/2 percent at an annual rate, considerably below that of the previous two quarters.

The implied decline in M3 velocity

would be at a 3-1/2 percent annual rate in the fourth quarter and nearly 4 percent over the year as a whole, the largest annual drop since 1982. (12)

M1, under alternative B, would be anticipated to expand in

November and December at about the reduced average September-October paceas a rebound in demand deposit growth would offset some moderation in inflows to OCDs.

Opportunity costs of holding OCD balances would likely widen

a little more as offering rates on NOW accounts continue to edge lower in adjustment to earlier rate declines.

M1 growth on a quarterly-average

basis would be at a 14 percent rate in the fourth quarter, implying a 10 percent rate of decline in its velocity.

For the year, M1 velocity would

-9-

(13) Debt of domestic nonfinancial sectors is likely to grow briskly over the final months of this year, bringing growth for the year on a QIV to QIV basis to 12-1/2 percent.

Federal borrowing is being boosted

somewhat as the Treasury rebuilds its cash balance following removal of debt ceiling constraints, while the underlying deficit remains large.

Issuance of

tax-exempt bonds is likely to strengthen further in the last two months of this year owing to efforts to utilize new annual volume caps for privatepurpose issues, including corporate IDBs.

Nonfinancial businesses are also

expected to step up their borrowing to finance merger and related activities in advance of less favorable tax treatment in 1987.

Household borrowing,

however, is likely to moderate somewhat from the pace of earlier months as automobile financing weakens in the wake of the expiration of incentive programs; mortgage borrowing is likely to be sustained near the relatively heavy pace of the summer and early fall. (14)

Alternative A assumes either a reduction in discount window

borrowing to a near-frictional level of $150 million or a cut in the discount rate of one-half percentage point with borrowing maintained at $300 million. In either event, the funds rate would move down to the 5-1/4 to 5-1/2 percent area.

Other short-term rates would also decline, with the three-month bill

rate dropping somewhat below 5 percent.

The response of bond yields would

depend on indicators of the outlook for economic activity and prices. Initially, bond yields might respond little to easier money market conditions, but declines in short-term yields could reinforce tendencies for longer-term yields to move lower if economic indicators pointed to a sluggish economy and little likelihood of greater underlying price pressures. The dollar might weaken appreciably under this alternative, absent any further easing actions abroad.

-10-

(15)

Growth in M2 and M3 under this alternative would not be

expected to slow any further over November and December.

The more liquid

M2 components would continue to be bolstered by very narrow opportunity costs, pulling funds from small time deposits and from the open market. This effect might be muted if the further decline in market rates tended to break the resistance of banks and thrifts to lowering rates on savings and NOW accounts-a development that might be considered more likely in the event the easier money market conditions were triggered by a cut in the discount rate to 5 percent, below the previous regulatory ceilings on these accounts.

Under this alternative, M2 would enter 1987 above the

8-1/2 percent upper end of its tentative growth cone but within its corresponding parallel bands.

Bank funding needs, and thus M3, might be enlarged

by more business lending in a response to lower short-term rates, especially if bond yields did not also decline. upper end of its tentative range.

M3 would enter next year around the

M1 under this alternative would be

expected to pick up somewhat relative to its growth over September and October, increasing in line with average growth in 1986. (16)

Alternative C contemplates an increase in discount window

borrowing to $500 million.

Federal funds would be expected to trade around

the 6-1/4 to 6-1/2 percent area.

The tighter reserve conditions of this

alternative would be expected to restrain growth in M2 and M3, raising the odds that these aggregates would come within their long-term ranges for 1986 and would enter 1987 within their new growth cones.

Higher short-term

interest rates also would act to damp M1 growth, although with opportunity costs still relatively small this aggregate would continue to expand rapidly, well in excess of income growth.

-11-

(17) There seems to be little expectation among market participants of a near-term tightening and thus three-month bills could rise as

much as 50 basis points, to about 5-3/4 percent under this alternative. Private short-term rates could increase by more than bills to the degree that firmer conditions were seen as intensifying the debt-servicing difficulties of some borrowers.

Bond rates would tend to back up also, although

the degree to which they would rise would depend on any accompanying reassessment of inflation prospects.

The dollar might strengthen, at least

for a while, on foreign exchange markets.

-12-

Directive language (18)

Draft language for the operational paragraph with the

usual alternatives is shown below.

The proposed format follows that

adopted at recent meetings in specifying numerical growth rates for M2 and M3 but not for Ml.

In addition, the draft retains August as the base

for the monetary growth specifications.

(Should the Committee wish to

change the base to September, growth implied under each alternative for the September-to-December period is shown in the detailed table on page 6.) The changes suggested for the sentence concerning M1 are intended to clarify the reference to the timing of the expected moderation in M1 growth.

The

sentence on possible intermeeting adjustments keeps the language adopted at the September meeting with respect to the role of the monetary aggregates and other factors.

It also retains the reference to the possibility of

"slight" adjustments to reserve pressures; the more usual terminology of "somewhat",

as well as alternatives with respect to the use of "might"

and "would" are given in parentheses. OPERATIONAL PARAGRAPH In the implementation of policy for the immediate future, the Committee seeks to DECREASE SOMEWHAT (Alt. A)/maintain (Alt. B)/ INCREASE SOMEWHAT (Alt. C) the existing degree of pressure on reserve positions.

This action is expected to be consistent with growth in

M2 and M3 over the period from August to December at annual rates of 7to9] ____AND____ percent, RESPECTIVELY. [DEL:

While growth in M1 OVER

THE SAME PERIOD is expected to moderate from the ITS EXCEPTIONAL PACE [DEL: exepetionally large increase] during the [DEL: past]PREVIOUS several

-13months, [DEL: that] growth IN THIS AGGREGATE will continue to be judged in the light of the behavior of M2 and M3 and other factors. Slightly (SOMEWHAT)

greater reserve restraint would (MIGHT),

slightly (SOMEWHAT) lesser reserve restraint might (WOULD), be acceptable depending on the behavior of the aggregates, taking into account the strength of the business expansion, developments in foreign exchange markets, progress against inflation, and conditions in domestic and international credit markets.

The Chairman

may call for Committee consultation if it appears to the Manager for Domestic Operations that reserve conditions during the period before the next meeting are likely to be associated with a federal funds rate persistently outside a range of ____ TO ____ [DEL: 4 to 8]percent.

Selected Interest Rates Percent November 3, Short-term Cs

Treasury bills secondary market

Period Sfund3 1 2

________

s 4 4

5 £

comm. papr

me ma

a8 6

bank prime 8 6

U.S. government constant maturity yields 11 10 9 9 107 r 1oI

Long-Term corporate municipal rond 13 12 1 1 1

1986

conventional home mortgages on primary market 16ma 15 14 14 15 16

1985--nHgh Low

8.98 7.13

8.65 6.77

9.21 7.06

9.13 7.34

8.31 7.00

10.75 9.50

11.19 8.24

11.95 9.07

11.89 9.34

13.23 10.62

10.31 8.85

13.57 10.52

13.29 11.09

11.14 9.17

1986--igh Low

9.55 5,.81

7.21 5.09

7.35 5.31

7.94 5.47

7.22 5.19

9.50 7.50

8.60 6.24

9.38 7.02

9.52 7.16

10.83 9.15

8.72 7.32

10.97 9.52

10.99 9.86

9.09 8.18

1985--Oct. Nov. Dec.

7.99 8.05 8.28

7.16 7.24 7.10

7.45 7.33 7.16

7.88 7.81 7.80

7.15 7.21 7.23

9.50 9.50 9.50

9.25 8.88 8.40

10.24 9.78 9.26

10.50 10.06 9.54

11.82 11.35 10.93

9.54 9.22 8.96

11.97 11.51 10.83

12.14 11.78 11.26

9.50 9.38 9.19

1986-Jan. Feb. Mar.

8.14 7.86 7.48

7.07 7.06 6.56

7.21 7.11 6.59

7.82 7.69 7.24

7.15 7.11 6.96

9.50 9.50 9.10

8.41 8.10 7.30

9.19 8.70 7.78

9.40 8.93 7.96

10.74 10.21 9.41

8.50 7.99 7.74

10.79 10.45 9.86

10.88 10.71 10.08

9.01 8.93 8.65

Apr. May June

6.99 6.85 6.92

6.06 6.15 6.21

6.06 6.25 6.32

6.60 6.65 6.73

6.58 6.22 6.18

8.83 8.50 8.50

6.86 7.27 7,41

7.30 7.71 7.80

7.39 7.52 7.57

9.26 9.50 9.65

7.64 7.96 8.30

9.71 10.22 10.45

9.93 10.21 10.68

8.53 8.57 8.60

July Aug. Sep.

6.56 6.17 5.89

5.83 5.52 5.21

5.90 5.60 5.45

6.37 5.92 5.71

6.02 5.74 5.34

8.16 7.90 7.50

6.86 6.49 6.62

7.30 7.17 7.45

7.27 7.33 7.62

9.57 9.51 9.56

7.95 7.59 7.53

10.16 9.75 9.98

10.49 10.15 10.01

8.52 8.37 8.20

July

2 9 16 23 30

7.02 6.87 6.51 6.42 6.32

6.01 5.90 5.78 5.74 5.84

6.05 5.94 5.84 5.84 5.96

6.55 6.45 6.36 6.31 6.31

6.19 6.15 6.09 5.99 5.89

8.50 8.50 8.07 8.00 8.00

7.03 6.96 6.79 6.75 6.92

7.38 7.34 7.24 7.19 7.41

7.26 7.18 7.16 7.24 7.48

9.49 9.54 9.51 9.67 9.69

7.90 7.91 7.91 8.08 7.96

10.27 10.17 10.07 10.22 10.07

10.61 10.59 10.43 10.40 10.40

8.54 8.57 8.50 8.48 8.49

Aug.

6 13 20 27

6.36 6.31 6.38 5.87

5.74 5.65 5.56 5.32

5.81 5.73 5.61 5.41

6.23 6.12 5.94 5.64

5.86 5.82 5.76 5.67

8.00 8.00 8.00 7.86

6.79 6.64 6.44 6.27

7.37 7.28 7.09 7.02

7.50 7.39 7.24 7.24

9.58 9.49 9.45 9.32

7.97 7.64 7.43 7.32

10.00 9.87 9.62 9.52

10.40 10.23 10.04 9.93

8.44 8.42 8.33 8.32

Sep.

3 10 17 24

5.83 5.82 5.88 5.81

5.22 5.20 3.16 5.24

5.31 5.41 5.46 5.50

5.47 5.63 5.73 5.80

5.53 5.38 5.34 5.30

7.50 7.50 7.50 7.50

6.24 6.51 6.69 6.75

7.06 7.31 7.54 7.59

7.28 7.52 7.69 7.75

9.43 9.59 9.72 9.62

7.37 7.63 7.57 7.55

9.77 10.02 10.07 10.07

9.90 9.96 10.07 10.10

8.33 8.18 8.19 8.10

Oct.

1 8 15 22 29

6.08 5.75 5.83 5.91 5.86

5.22 5.09 5.11 5.28 5.22

5.49 5.32 5.33 5.48 5.46

5.78 5.64 5.63 5.77 5.74

5.30 5.26 5.21 5.19 5.20

7.50 7.50 7.50 7.50 7.50

6.69 6.48 6.50 6.67 6.60

7.47 7.33 7.42 7.56 7.44

7.63 7.56 7.72 7.84 7.73

9.50 9.51 9.52 9.49 9.32

7.57 7.47 7.50 7.49 7.30

9.92 9.82 9.87 9.77 9.72

10.08 9.99 9.96 9.95 9.89

8.18 8.08 8.03 8.03 7.98

5.83 5.83 5 95 . p

5.27 5.18 5.20

5.48 5.38 5.42

5.75 5.60 5.61

7.50 7.50 7.50

6.64 6.52 6.51p

7.47 7.31 7.34p

7.76 7.61 7.62p

Waily-Oct. 24 30 31

NOTE: Weekly data for columns 1 through 11 are statement week averages. Data In column 7 are taken from Donoghues Money Fund Report. Columns 12 and 13 are 1-day quotes for Friday and Thursday, respectively, following the end of the statement week. Column 13 is the Bond Buyer revenue index. Column 14 Is the FNMA purchase yield, plus loan servicing fee, on 30-day mandatory delivery commitments on the Friday following the end of the statement week Column 16 I the average contract rate on new commitments for fixed-rate mot-

gages (FRMs) with 80 percent loan-to-value ratios at a sample of savings and loans. Column 16 is the average initial contract rateon new commitments for one-year, adustable-ate mortgages (ARM) at S&Ls oftering both FRMs and ARMs with the same number of discount points. FR 1367 112/85)

Strictly Confidential

Money and Credit Aggregate Measures

(FR)-

Seasonally adjusted NOV. Money stock measures and liquid assets PRrlod

nontransuclions components In M2 In M3 only

Bank credit M3

total loans and 1 invs_ tment

1986

Domestic nonfinancial debt

U.S. goernment

other

tlolal

PKRCNT ANNUAL GBOHTH: AIIUALLY (1UV ,O ulI) 1983 1984 1985

10.4 5.4 11.9

12.2 8.0 8.7

12. 8.8 7.7

1.0 21.2 3.8

9.9 10.5 7.7

10.4 11.9 8.5

1U.b 11.2 9.9

21.3 16.0 15.2

8.6 13.7 12.7

11.2 14.2 13.3

UUATir8LY 4TI QTM. 1ST Utd. 29D QT1. 380 UTi.

10.7 7.7 15.8 17.4

6.1 4.3 10.4 11.2

4.7 J.3 8.7 9.1

8.6 20.6 3.4 6.0

6.6 7.5 9.0 10.1

9.5 8.3 7.0

9.4 14.U 4.1 10.3

13.7 16.9 11.5 14.5

13.2 14.7 9.2 10.6

13.3 15.2 9.7 11.5

1985--OCT. NOV. DUC.

5.3 11.5 12.6

4.3 5.0 7.1

3.9 4.2 5.3

11.4 5.7 9.0

5.7 5.9 7.5

7.1 12.0 12.3

5.4 I3.3 15.5

7.6 2J.2 27.9

11.9 12.7 21.1

10.9 15.1 22.7

1986-JAN. IPB. lAI. AMR. gAl JUNE JULY AUG. SBPT. OCT. PC OirM LI LBIsLS 1986--1A1 JUNU JULI AUG. SiPT.

1.1 7.3 14.1 14. 23.4 14.8 16.7 20.8 9.9 15

1.6 J.b 6.8 13.7 12.b 9. 12.u 11.1 7.4 10

1.7 2.4 4.6 13.5 9.1 7.7 i1.b 7.9 6.6 8

37.8 16.9 11.6 2.5 -10.5 4.7 13.8 0.0 14.0 -9

8.7 6.3 7.8 11.5 7.9 8.5 13.0 8.9 8.8 6

7.1 5.9 4.3 7.2 9.9 7.1 10.0 9.2

18.7 J.4 . 7 2.0 5.9 3.8 13.2 1J.8 11.5 1

15.8 9.6 ).5 9.5 17.2 19.4 14.8 d.8 11.1

18.0 7.0 8.0 10.1 9.8 8.7 9.2 13.5 12.8

17.5 7.6 7.6 9.9 11.5 11.2 10.6 12.4 12.4

658.7 666.8 676.1 b87.8 693.b

2649.6 2670.6 2699.1 2124.1 2741.0

1991.0 d003. 8 2023.0 103Jb. 2047. 5

665.7 668.J 676.0 b6.0 683.9

3315.3 3338.9 3375.1 3400.1 3424.9

3950.5 3973.8 4007.0 4037.7

1957.5 1963.7 1985.0 200U . 7 2027.

1664.6 1691.5 171 2. 1724.9 1740.8

5414.9 5454.1 5496.1 5558.0 5617.3

7079.5 7145.5 7206.4 7282.9 7358.1

AIRAGE 1985 1986 1986 1986 P

($1ILL1ONS)

NUEKLL LEVELS (SBILLIOIS) 1986-58P. 1 8 15 22 29 OCT.

1/ 2/

6 13P 20P

693.0 1695.5 690.8 b94.7 693.6 701.6 696.6 7U2.6

A1 UAl. LaTZS k'O dAlLK CDITOJ AMt ADJUtPEDU fU a ZAN~.,YEREOk LOANS JONR COlIlMILMITAL ILLIJNUA NATIONAL BANK TO THE FDIC UiGIMMING SEPTEMBR t, 19U4. 0UBd U1D'A AkII ON A HiJNUij.t AIV6.;AuE AS1J.S,DlUEi.VL 81 AVLRAGIING LND-OF-lOUdIH LhVELS OF AUJA.NT MlUNTdb, AND HAVE BfiEN AlDJUSTED To bi&MOVL DISWuNTIMULT1Lh. PM-i'HdttL

INSI ES

ATIA

Components of Money Stock and Related Measures Billions of dollars, seasonally adjusted unless otherwise noted NOV.

Other Period

Currency

Overnight

Demand checkable RPs and Eurodollars deposits deposits NSA 4 2 3

. MMDAs NSA

Savings deposits

denoml-

mutual tunds, NSA

denomi-

Term

Tern

Institutions only

nation time deposits' 10

RPs NSA

Eurodollars NSA

nation gineral time purpose, deposits' and broker 7 8

1986

ShortSavings bonds

Commer- Bankers term Treasury cial paper accepsecurities tances _ idealer 4

309.7 291.0 303.2

775.0 881.8 877.3

138.2 161.7 116. 8

43.d 57.7 64.1

325.2 409.8 433.1

48.U 65.6 63.0 6J. U

89.3 81.8 77.8

70.9 74.0 79. U

210.3 268.5 297.1

127.5 158.7 199.5

44.0 44.5 42.7

499.8

300.3

708.3

176.7

62.3

425.7

58.6

78.9

78.0

281.6

187.2

43.2

65.2 66.4 70.3

504. I 509.5 512<.0

302. 3 303.7 303.6

875.7 876.0 U80O.3

177.0 176.8 176.5

63.3 64.5 64.6

429.8 432.9 436.5

59. 63.3

66.0

78.2 78.4 76.7

78.5 79.0 79.5

282.1 300.7 308.4

194.5 196.4 209.5

43.9 43.1 41.1

180.5 183.1 185.3

68.9 68.5 67.6

515.7 516.3 520.5

304.0 304.9 306.9

885.a 891.0 894.

177.7 181.0 186.2

67.3 67.7 70.2

447.9 451.3 450.5

68.8 70.6 71.6

76.0 79.2 82.7

79.9 80.5 81.1

305.5 307.7 300.2

230.6 209.2 209.5

41.6 42.4 41.7

275.7 281.6 284.9

189.9 195.1 199.0

68.5 69.0 66.3

525.2 530.8 540.4

311.4 318.5 325.0

895.9 891.2 885.6

191.4 193.2 197.3

74.1 76.1 75.0

452.1 446. 4 445.1

71.5 74.2 75.5

81.5 79.8 80.1

81.8 82.6 83.4

298.8 305.7 300.5

403.0 206.7 210.6

41.0 40.1 40.3

280.3 291.8 292.2

203.9 210.6 215.1

71.7 74.2 72.3

546.2

331.1 337.3 343.9

883.7 877.3 871.5

199.7 200.3 202.2

77.5 80.8 84.4

445.7 447.6 446.8

75.2 75.8 78.4 7b. 4

78.8 78.2 80.6

84.3 85.3

296.0 295.8

212.3 219.3

39.4 37.2

147.2 157.8 169.7

243.4 247.1 268.4

130.4 144.2 176.3

53.6 56.1 67.3

376.2 40s.1 506.5

167.7

260.4

171.5

64.5

168.7 169.0 170.6

266.0 267.8 271.5

173.7 176.7 170.6

BAll.

171.9 172.9 173.9

268.9 269.2 273.2

APR. BAY JOu8

174.4 175.8 176.7

JULY AUG. SEPT.

177.5 179.0 179.

1983 1984 1985

Large

ANaiBLLI (4T

Money market

____________

Small

QTB):

HIIOMTIL 1985-SIPT. OCT. DEC. 1986-JAM.

1/ 2/ 3/

55.3

55: .7

INCLUDES BETAIL REPURCHASE AGRE dNTS. ALL ia* AND KOGH ACCOUNTS AT COHHMECIAL BANKS AND f HFT II NSTITUTIONS FROM SMALL TIB DPOSITS. SICLOUDA IlA AND KEOGH ACCOUNTS. IET O1 LARGE DElOB£LIN&TI TIH DEPOSITS HELD 81 80NXYMARKET MUTUAL FUNUS AND THRIFT INSTITUTiONS.

ARE SUBTRACTED

STRICTLY CONFIDENTIAL (FR)

Net Changes in System Holdings of Securities'

CLASS II-FOMC

Millions of dollars, not seasonally adjusted

November 3, 1986 Treasury bills net change'

Period

1980 1981 1982 1983 1984 1985

-3,052 5,337 5,698

1986--QTR. I II III

-2,821 7,585 4,668

1986--Jan. Feb. Mar.

-3,277 396

13,068 3,779 14,596

2,988 3,196 1,402

July Aug. Sept.

867 2,940 861

Apr.

6 13

20 27

Sept. 3 10 17 24

168 126 349 67 2,287 119 281 151

1 8 15 22 29

295 106 120

LEVEL--Oct. 29 ($ billions)

95.9

Oct.

912 294 312 484 826 1,349

May June

Aug.

Treasury coupons net purchases' within 1-year

472

1-5

5-10

Federal agencies net purchases' total

over 10

2,138 1,702 1,794 1,896 1,938 2,185

4,564 2,768 2,803 3,653 3,440 4,185

22.8

92.4

17.3

36.7

15.6

total

5-10

over 10

total

217 133 4-

1-5

within ,-yearoverlg

1. Change from end-of-period to end-of-period. 2. Outright transactions In market and with foreign accounts, and redemptions (-) in bill auctions, 3. Outright transactions in market and with foreign accounts, and short-term notes acquired in exchange for maturing bills. Excludes redemptions, maturity shifts, rollovers of maturing coupon issues, and direct Treasury borrowing from the System. 4. Outright transactions in market and with foreign accounts only. Excludes redemptions and maturity shifts.

2.6

3.8

1.2

8.0

Net change outright holdings total'

Net RPs'

2,035 8,491 8,312 16,342 6,964 18,619

2,462 684 1,461 -5,445 1,450 3,001

-2,861 7,535 4,577

-3,580 -356 4,044

61 -3,318 396

-3,466 198 -312

2,988 3,146 1,402

3,659 -4,470 455

867 2,850 861

-1,270 -448 5,762

168 36 349 67

-341 425 -633 1,310

2,287 119 281 151

-1,085 2,179 -2,438 1,108

236 106 120 -34 472

-1,708 469 1,529 5,065 -6,223

200.0

-3.7

5. In addition to the net purchase of securities, also reflects changes in System holdings of bankers' acceptances, direct Treasury borrowing from the System and redemptions (-) of agency and Treasury coupon issues. 6. Includes changes in RPs (+), matched sale-purchase transactions (- ), and matched purchase sale transactions ( + ).

Cite this document

APA

Federal Reserve (1986, November 4). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19861105

BibTeX

@misc{wtfs_bluebook_19861105,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1986},
  month = {Nov},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19861105},
  note = {Retrieved via When the Fed Speaks corpus}
}