bluebooks · October 1, 1990

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.

September 28, 1990

Strictly Confidential (FR)

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

September 28, 1990

MONETARY POLICY ALTERNATIVES Recent Developments (1)

Open market operations since the last Committee meeting have

continued to be directed toward maintaining unchanged pressures on reserve conditions, with the expectation that federal funds would trade around 8 percent.

In the three maintenance periods completed since then, federal

funds traded generally in that area, although the rate spiked well above that level late on the last day of each of these periods.

On two of those

days, the Desk refrained from meeting projected reserve needs because federal funds were trading below 8 percent and markets were looking for signs of an easing of policy; the third instance arose from an unexpected shortfall in reserves.

Largely reflecting the resulting heavy borrowing

on those days, adjustment plus seasonal borrowing over the intermeeting period has averaged appreciably above the path of $500 million.1

So far

in the current maintenance period, federal funds generally have traded somewhat above 8 percent.

Pressures apparently arose from positioning in

advance of the quarter-end statement date interacting with emerging cautious reserve management policies by money center banks worried about potential funding difficulties in the wake of heightened market concerns about bank soundness.

1. Actual borrowing in the three maintenance periods that ended in the intermeeting period was: $1,086 million (period ending August 22); $631 million (period ending September 5); and $700 million (period ending Borrowing is averaging $508 million thus far in the September 19). current maintenance period.

(2)

Concerns about the condition of banks intensified in recent

days after reports of large losses and dividend reductions at several institutions and continued indications of a weak outlook for real estate markets and the economy more generally.

Shifting perceptions of risk were

reflected in a sharp increase over the intermeeting period in spreads between Treasury securities and private instruments in short-term markets, with Treasury bill yields falling as many as 40 basis points while returns on commercial paper and CDs rose about 1/8 percentage point.

In addition,

spreads on the longer-term debt of money center banks widened considerably, and share prices of these banks fell about 18 percent on average. Treasury bond yields moved higher on balance through most of the intermeeting period, tracking oil prices, whose increase was seen as leading to higher inflation.

In the last few days, however, Treasury bond yields

have retraced that rise amid optimism about the budget negotiations and concerns about financial fragility.

Investment-grade corporate bonds were

little changed on balance over the period, but with higher oil prices also presaging a sluggish real economy, spreads on below-investment-grade bonds widened significantly and broad stock price indexes moved down more than 5 percent. (3)

The dollar has shown little net change on a weighted average

basis, remaining near the lower levels reached by the last FOMC meeting. The dollar has declined by 5-1/2 percent against the yen since that meeting as Japanese short- and long-term rates rose by 35 and 50 basis points, respectively, in response to a tightening of monetary policy and to indications of continued robust economic growth.

However, the dollar

appreciated against sterling, which eased off when it became clear that, contrary to expectations, the United Kingdom was not going to enter the exchange rate mechanism of the EMS in September, and against the Canadian dollar, where an easing in monetary policy brought short-term rates down by one-half percentage point.

On average, short-term interest rates

abroad were about unchanged, while long-term rates rose by 20 basis points.

(4) M2 accelerated in August to a 6-1/2 percent rate and is estimated to have about maintained that pace in September.

As a result,

M2 expansion in the June-to-September period has been about 1 percentage point above the 4 percent rate expected by the Committee, though remaining a little below the midpoint of its annual range.

The recent strength of

M2 seems attributable largely to the uncertainty engendered by the invasion of Kuwait and the consequent spike in oil prices.

M2 received its

greatest boost from a surge in money market mutual funds, as investors apparently switched out of the stock and bond markets.

In addition, cur-

rency growth surged in August and remained at a high level in September as demands from the Middle East were added to already strong flows to South America.2

By contrast, the retail deposit component of M2 has strength-

ened relatively little in recent months, increasing at only a 2-1/2 percent rate over August and September.

2. With demand deposits also strong, M1 expanded in August and September at rates of 10-1/2 and 8-3/4 percent, respectively. The monetary base rose at double-digit rates in both months.

(5) The strength of M2 showed through to M3.

There was a pause

through early September in RTC activity and its associated damping effects on M3; this aggregate was bolstered as well by considerable inflows to M3type money funds.

The pickup in M3 growth was restrained, however, by

large increases in government balances at banks.

Some of these deposits

were used to reduce managed liabilities, although a large share of them seemed to have funded lending to government securities dealers.

M3 growth

over August and September averaged 3-1/2 percent, about in line with the Committee's expectations, bringing expansion thus far this year to around 2 percent. (6) Growth of private credit likely has remained subdued in the last couple of months, reflecting both weak demand and adverse supply conditions.

In bond markets, issuance by businesses and states and

municipalities has been discouraged by rising rates; markets have been particularly unreceptive to below-investment grade business borrowers, and quality spreads in tax-exempt markets also have widened.

Postponed bond

issuance by better-rated businesses has been reflected in strength in commercial paper, but non-merger-related business borrowing at banks continues to be very sluggish.

Little credit seems to be available for com-

mercial real estate, and slowing loan growth in this area has contributed to a moderation in total real estate lending.

On the other hand, consumer

loans adjusted for securitizations have picked up, expanding at an 8 percent pace in recent months.

Federal government borrowing accelerated

sharply in the third quarter, swollen by needs to finance expected RTC

-5-

expenditures, helping to maintain growth in total nonfinancial debt around the 7 percent middle of its annual range.

-6MONEY, CREDIT, AND RESERVE AGGREGATES (Seasonally adjusted annual rates of growth)

Sept. pe

QIV'89 to Sept. pe

July

Aug.

-0.3

10.4

8.8

4.8

1.7

6.6

6.4

4.4

0.9

4.6

2.5

1.9

Domestic nonfinancial debt

7.5

9.1

n.a.

6.9

Bank credit

6.9

10.3

3.9

6.3

Nonborrowed reserves

-7.1

2.2

7.2

-0.2

Total reserves

-8.2

8.7

3.4

0.3

Monetary base

6.4

13.2

14.9

9.0

(Millions of dollars) Adjustment plus seasonal borrowing

477

799

615

Excess reserves

862

872

864

Money and credit aggregates

Reserves measures

Memo:

pe - Preliminary estimate. n.a. - Not available. 1. Through August. 2. Reserves data for September incorporate assumptions of $500 million of adjustment plus seasonal borrowing and $950 million of excess reserves for the maintenance period ending October 3. 3. Includes "other extended credit" from the Federal Reserve. NOTE:

Monthly reserve measures, including excess reserves and borrowing, are calculated by prorating averages for two-week reserve maintenance periods that overlap months.

-7-

Policy Alternatives (7) Three policy alternatives are given below for consideration by the Committee.

Under alternative B, federal funds would continue to

trade around 8 percent.

Under alternatives A and C, federal funds trading

would center around 7-1/2 and 8-1/2 percent, respectively.

In view of the

decline in the demand for seasonal credit that typically occurs during the fall, borrowing under alternative B would initially be specified at $450 million, a reduction of $50 million from the current level, and the assumption probably would need to be lowered another $50 to $100 million over the intermeeting period.

Under alternatives A and C, the initial

specification for borrowing would be $400 million and $500 million, respectively.

Desk operations over the intermeeting period may need to

take account of continued cautious reserve management by banks concerned about potential funding difficulties; those banks may want to carry a larger cushion of excess reserves and would be especially eager to avoid being seen at the discount window. (8) Financial market conditions over the intermeeting period will depend not only on the course of monetary policy and the market response to the usual array of macroeconomic and price data, but also on developments in three important areas of particular uncertainty.

The

first is the situation in the Persian Gulf and its implications for oil prices.

Other things equal, bond yields and oil prices probably will

continue to tend to move together, as the effects on inflation prospects and perhaps uncertainty dominate the impact of opposite changes in real rates associated with economic activity.

Major changes in the outlook in

this area also may affect money growth and risk premiums by feeding back on demands for liquidity and safety. (9) Reports of progress in budget negotiations have already contributed to a bond market rally in recent days, and further price gains are likely to follow an agreement that implied a significant degree of fiscal restraint over several years.

The reaction of the bond market may

reflect expectations about the System's response as well, for market participants would expect a monetary policy easing to be forthcoming after such an accord.

Thus, other short-term interest rates also are likely to

drop, even before any decline in the federal funds rate.

On the other

hand, if the budget stalemate continued with a resulting sequester--or possibly a deferral of the Gramm-Rudman-Hollings process--uncertainty about the ultimate direction of fiscal policy would be prolonged, contributing to volatility in financial markets.

The potential reversion of

the debt ceiling to a lower level on October 3 is a further complicating factor, which would disrupt Treasury financing and contribute to market volatility. (10)

Finally, there is some risk that concerns about the health

of banking and other financial institutions could intensify.

The rapidity

and size of the drop in bank stock and debt prices suggest that considerable negative news about these institutions already has been discounted, and some of the market movement of recent days may reflect institutional investors' reluctance to hold bank paper over the quarter-end statement date.

Still, markets remain skittish, and even in the absence of new

information confidence could erode further.

With funding sources even

-9-

more expensive and additional pressures on capital constraining asset growth, affected institutions would likely curtail credit further and raise the price and nonprice terms on loans. could be affected as well.

Monetary growth patterns

Should banks encounter increasing resistance

in raising uninsured funds, they could take steps to secure more stable funding by bidding more aggressively for retail deposits, especially small time deposits.

These actions would lead to higher growth of M2 for a

time, but M3 growth would be depressed somewhat further as banks cut back on asset expansion. (11)

It appears that the expectation of an immediate easing of

monetary policy is no longer so prevalent in the markets, although some relaxation still seems to be anticipated over coming months, partly reflecting an expected budget accord.

The market response to unchanged

policy under alternative B will depend crucially on budget developments in coming days.

Should an inadequate agreement appear to be in train,

rates could reverse some of the declines of recent days, but there would be no effect from holding monetary policy unchanged.

As noted above,

however, a significant budget agreement would extend the recent market rally and engender expectations of near-term policy action.

In this case,

maintaining unchanged money market conditions for an extended period would disappoint these expectations and cause rates to back up. (12)

Barring an immediate, credible agreement that had already

reduced interest rates, the decline in the federal funds rate under alter-

native A would be expected to show through in other money market interest rates.

Private rates might drop a little more than those on Treasury

-10-

bills if the lower rates were seen as lessening financial stresses.

With

market participants generally viewing the economy as weak, some decline in bond yields may accompany this policy action.

In the absence of a cred-

ible budget agreement or a lessening of tensions in the Middle East, any bond market rally would be quite limited, however, if the easing raised questions about the System's commitment to containing inflation.

The

dollar could come under renewed downward pressure in response to the reduction in U.S. interest rates. (13)

The tightening of monetary policy under alternative C would

be seen under current circumstances as signalling an aggressive stance against the inflationary consequences of the oil shock. is not anticipated by market participants.

Such a tightening

Given concerns about financial

fragility, yields on private obligations could rise significantly, while the increase in bill rates could be limited by greater demands for safe assets.

Perceptions that the central bank would not permit inflation to

rise permanently as a result of the oil shock would hold down any increase in yields on longer-term instruments. (14)

Growth in the monetary aggregates expected under the three

alternatives is presented in the table below, along with implied growth on a fourth-quarter to fourth-quarter basis.

(Detailed data are presented on

the table and charts on the following pages.)

Under all three alterna-

tives, growth of money over the final three months of the year is expected to be somewhat slower than in August and September.

With regard to M2,

both the increased demand for U.S. currency in the Middle East that developed in the wake of the invasion of Kuwait and the flight from capital

-11-

markets into money fund shares are assumed to diminish over the remainder of the year.

In addition, the recent pickup of RTC activity is expected

to restrain deposit growth in the near term, as occurred in similar circumstances at the end of the second quarter.

Alt. A

Alt. B

Alt. C

5-1/2 2-1/2 8

4 2 6

2-1/2 1-1/2 4

4-1/2 2 5-1/4

4-1/2 2 5

4 2 4-3/4

5-1/2 to 9-1/2

6 to 10

6-1/2 to 10-1/2

Growth from Sept. to Dec. M2 M3 M1 Growth from Q4'89 to Q4'90 M2 M3 M1 Associated federal funds rate ranges

(15)

Under alternative B, with some reversal of recent declines

in bill rates, opportunity costs are not expected to be a significant influence on M2 growth over the next few months.

Still, velocity would

decline at a 2 percent annual rate since the 4 percent growth of M2 from September to December under this alternative would imply quarterly average growth of 4-3/4 percent.

Money demand is not expected to react much over

coming months to the sharp decline in nominal GNP growth in the fourth quarter; such a decline would not be seen as indicative of the behavior of permanent income, and nominal consumption spending is expected to remain strong.

Under alternative A, the drop in opportunity costs would boost

Alternative Levels and Growth Rates for Key Monetary Aggregates M2

Alt. A

Alt. B

Alt. C

Alt. A

Alt. B

Alt. C

Alt. A

Alt. B

Alt. C

3283.7 3301.8 3319.3

4072.3 4087.8 4096.2

809.2 816.2 822.2

3332.5 3348.1 3365.0

3330.3 3341.4 3352.5

3328.1 3334.7 3340.0

4104.4 4113.3 4122.9

4103.4 4110.6 4117.8

4102.4 4107.9 4112.7

827.7 832.9 838.5

827.0 830.8 834.4

826.3 828.7 830.3

1.7 6.6 6.4

0.9 4.6 2.5

-0.3 10.4 8.8

4.8 5.6 6.1

4.0 4.0 4.0

3.2 2.4 1.9

2.4 2.6 2.8

2.1 2.1 2.1

1.8 1.6 1.4

8.0 7.5 8.1

7.0 5.5 5.2

6.0 3.5 2.3

Quarterly Ave. Growth Rates 7.1 1989 Q4 6.4 1990 Q1 2.9 Q2 Q3 3.1 Q4 5.7

7.1 6.4 2.9 3.1 4.8

7.1 6.4 2.9 3.1 4.0

2.0 3.0 0.8 1.6 2.8

2.0 3.0 0.8 1.6 2.5

2.0 3.0 0.8 1.6 2.2

5.1 4.8 3.5 4.2 8.4

5.1 4.8 3.5 4.2 7.3

5.1 4.8 3.5 4.2 6.1

June 90 to Sept 90 Sept 90 to Dec. 90

4.9 5.5

4.9 4.0

4.9 2.5

2.7 2.6

2.7 2.1

2.7 1.6

6.3 7.9

6.3 5.9

6.3 3.9

Q4 Q4 Q4 Q4 Q4 Q4

4.7 4.2 4.6 4.2 4.4 4.7

4.7 4.2 4.4 4.2 4.4 4.4

4.7 4.2 4.1 4.2 4.4 4.0

1.9 1.8 2.0 1.9 1.9 2.1

1.9 1.8 2.0 1.9 1.9 2.0

1.9 1.8 1.9 1.9 1.9 1.9

4.2 4.2 5.3 4.3 4.8 5.6

4.2 4.2 5.1 4.3 4.8 5.1

4.2 4.2 4.8 4.3 4.8 4.6

Levels in billions 1990 July August September October November December Monthly Growth Rates 1990 July August September October November December

89 89 89 89 89 89

to to to to to to

Q2 90 Q3 90 Q4 90 Aug. 90 Sept 90 Dec. 90

1990 Target Ranges:

3.0 to 7.0

1.0 to 5.0

Chart 1

ACTUAL AND TARGETED M2 Billions of dollars

Actual Level

3450

* Short-Run Alternatives

-4 3400

3350

-, o

o .

°^

3300

3250

3200

-4 3150

D N 1989

I J

I F

I M

I A

I M

I J

J 1990

I A

I S

I O

I N

3100 D

J 1991

Chart 2

ACTUAL AND TARGETED M3 Billions of dollars 4275

Actual Level * Short-Run Alternatives -1 4225

4175

,--

«*s

OA *B sC

4125

4075

4025

3975

I O

I D N 1989

J 1990

3925 J 1991

Chart 3

M1 Billions of dollars 10%

875

--Actual Level ------ Growth From Fourth Quarter * Short-Run Alternatives

-4 850

-4 800 V

-'----------------------------------

I I

D N 1989

825

I I

,-'

I I

A J 1990

I 1 t I I J D N O S 1991 I

775

Chart 4

DEBT Billions of dollars 10750

Actual Level - - -

Estimated Level

* Projected Level

-/ ,

10500

,,oI

10250

S ## #S

-H 10000

-4 9750

D N 1989

A J 1990

I-

I --- O

9500

J 1991

-13-

demand for M2, further depressing velocity.

Velocity would still decline

under alternative C, though by less as opportunity costs widened with the rise in short-term market interest rates.

Under all three alternatives,

M2 would end the year a little below the midpoint of its 1990 range. (16)

The slower growth of M3 reflects both softer demands for

credit at depositories owing to weaker economic activity in the near term and continued restraint on lending by banks and thrifts.

Under alterna-

tive B, M3 is projected to expand at a 2 percent rate over the Septemberto-December period, nearly a percentage point less than over the preceding three months.

Although slightly faster or slower growth rates would be

expected under alternatives A and C, under all three alternatives this aggregate would be appreciably above the lower bound of its annual range. (17)

Overall, the pace of lending in the months ahead is

expected to remain relatively slack.

Credit supply constraints are likely

to continue to have their major effect on commercial real estate.

In the

household sector, home mortgage borrowing is likely to remain damped by depressed housing activity, and consumer credit should decelerate with the decline in spending on consumer durables.

Although small businesses and

those below investment grade may feel the effects of intensifying problems of the banks, investment grade borrowers should retain ready access to funds.

Nonetheless, corporations may continue to delay bond issuance

until long-term interest rates decline, to some extent substituting commercial paper issuance.

The financial condition of some state and local

governments may limit access to markets, reducing borrowing.

In contrast,

-14-

federal borrowing should remain heavy, even if there were to be a significant budget package, bolstered by RTC expenditures and the boost in the deficit engendered by the weak economy.

The growth of total domestic

nonfinancial debt is expected to fall to a 5-1/2 percent pace for the September-to-December period, bringing the increase over the year to about 6-1/2 percent on a fourth-quarter to fourth-quarter basis, near the middle of the 5 to 9 percent monitoring range for this aggregate.

-15-

Directive Language (18)

Draft language for the operational paragraph, including the

usual options and updating, is shown below.

OPERATIONAL PARAGRAPH In the implementation of policy for the immediate future, the Committee seeks to DECREASE SOMEWHAT/maintain/INCREASE SOMEWHAT the existing degree of pressure on reserve positions.

Taking account of progress toward price

stability, the strength of the business expansion, the behavior of the monetary aggregates, and developments in foreign exchange and domestic financial markets, slightly (SOMEWHAT) greater reserve restraint (WOULD) might or (SLIGHTLY) somewhat lesser reserve restraint would (MIGHT) be acceptable in the intermeeting period.

The contemplated

reserve conditions are expected to be consistent with June through] growth of M2 and M3 over the period from [DEL: September THROUGH DECEMBER at annual rates of about ____ AND ____ [DEL: 4 and 2-1/2]percent respectively.

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 [DEL: 6 to 10]percent. TO ____ a range of ____

October 1, 1990

SELECTED INTEREST RATES (percent) hiaft lr

federal funds

Treasury bills secondary market 3 -month I B-mantblI

I i '---L-(--

I--~-

.n...u..l CDs

-ear

I a

(------iL-I--

...

comm I secondary paper market 3 -month I -mnt

II--LII

market mutual

......

I money

bank prime an

L..--.

Scorporate I US govelnment constant

maturity yields

Lvear 10 year

-I

I I

1 '

A utility

convenlional home mortgages municipal I

ecenly

Bond

secondary

marke

30-yr 1 '

1 '

primary market

I I

al _I1

I I

89-- High Low

9.95 8.38

9.04 7.54

10.23 8.24

9.98 8.35

9.19 7.87

11.50 1050

9.77 7.60

9.46 7.78

9.26 7.85

10.47 9.26

7.95 7.19

11.73 992

11.22 968

941 8.34

90--

Low

8.33 8.03

7.96 7.35

8.58 7.86

8.48 7.90

806 7.46

10.50 10.00

9.09 7.90

9.07 7.94

9.13 8.00

10.50 9.55

7.81 7.33

10.99 10.07

10.67 9.80

8.63 8.26

Monthly Sep Oct Nov Dec

89 89 89 89

9.02 8.84 8.55 8.45

7.75 7.64 7.69 7.63

8.78 8.60 8.39 8.32

8.87 8.66 8.47 8.61

8.60 8.56 8.33 8.22

10.50 10.50 10.50 10.50

8.25 8.02 7.80 7.77

8.19 8.01 7.87 7.84

8.15 8.00 7.90 7.90

9.55 9.39 9.28 9.36

7.52 7.48 7.39 7.31

10.44 10.19 10.06 10.06

10.13 9.95 9.77 9.74

8.71 8.62 8.51 8.39

Jan Feb Mar Apr May Jun Jul Aug

90 90 90 90 90 90 90 90

8.23 8.24 8.28 8.26 8.18 8.29 8.15 8.13

7.64 7.74 7.90 7.77 7.74 7.73 7.62 7.45

8.16 8.22 8.35 8.42 8.35 8.23 8.10

8.05 7.94 7.95

10.11 10.00 10.00

8.13 8.39 8.63

7.99 7.98 7.96 7.64 7.49

1000 10.00 10.00 10.00 10.00

8.78

7.97

8.20 8.22 8.32 8.32 8.24 8.21 8.09 7.99

8.69 8.40 8.26 8.22

8.21 8.47 8.59 8.79 8.76 8.48 8.47 8.75

8.26 8.50 8.56 8.76 8.73 8.46 8.50 8.86

9.63 9.84 9.92 10.09 10.04 9.85 9.96 10.29

7.43 7.52 7.53 7.62 7.59 7.47 7.40 7.57

10.30 10.49 10.61 10.75 10.68 10.37 10.26 10.41

990 10.20 10.27 10.37 10.48 10.16 10.04 10.10

8.39 8.46 853 8.55 8.59 850 8.43 8.35

8.26 8.30 8.28 8.28

7.71 7.71 7.70 7.78

8.22 8.23 8.22 8.26

8.16 8.19 8.21 8.24

7.66 7.65 7.66 7.66

1000 10.00 10.00 1000

8.41 8.38 8.40 8.45

8.48 8.46 8.48 854

8.47 8.43 8.45 8.51

9.78 9.83 9.89 9.92

7.49 7.46 743 748

10.34 10.37 10.43 10.33

1010 10.12 10.16 1015

850 850 8.50 845

90 90 90 90

8.33 8.28 8.14 8.05

7.73 7.76 7.61 7.53

8.25 8.25 8.12 8.00

8.25

7.67 7.65 765 7.59

10.00 10.00 10.00 10.00

8 32 8 42 8.26 8.21

843 8.53 8.47 8.50

8.42 8.52 8.49 8.56

10.00 9.94 9.99 9.94

7.43 740 7.40 7.38

10.36 10.28 10.23 10.18

10.06 1011 9.99 9.98

8.46 845 8.39 841

Aug 1 90 Aug 8 90 Aug 15 90 Aug 22 90 Aug 29 90

8.03 8.07 8.13 8.30 8.08

7.50 7.35 7.42 7.53 7.50

7.93 7.86 7.89 8.04 8.10

7.91 7.90 7.97 8.06 8.07

7.55 7.49 7.49 7.51 7.47

1000 10.00 10.00 10.00 10.00

8.09 8.10 8.10 8.30 8.41

8.38 8.62 8.67 8.82 8.95

8.44 8.71 8.78 8.95 9.06

10.07 10.22 10.34 10.50 10.31

7.33 7.51 7.53 7.80 7.70

10.07 10.37 10.46 10.71 10.46

9.84 10.08 10.05 10.29 10.24

8.38 8.39 8.31 8.36 8.30

Sep 5 90 Sep 12 90 Sep 19 90 Sep 26 90

8.25 8.12 8.18 8.26

7.40 7.40 7.37 7.36

7.97 7.96 8.00 8.21

7.98 7.99 8.06 8.21

7.47 7.47 7.46 7.47

10.00 10.00 10.00 10.00

8.27 8.25 8.22 8.35

8.87 8.83 8.87 8.99

9.00 8.96 9.02 9.13

10.23 10.28 10.35 10.25

7.68 7.64 7.73 7.81

10.42 10.41 1049 10.48

1019 10.13 10.16 10.22

8.29 8.26 8.30 8.28

Daily Sep 21 90 Sep 27 90 Sep 28 90

8.22 8.21

7.36 7.23 7.14

8.16 8.27 8.22

10.00

8.05p

8.18 8.27 8.18

8.31 8.28 8.20 p

8.99 8.91 8.82p

9.13 9.05 8.96 p

High

Weekly Jun 6 90 Jun 13 90 Jun 20 90 Jun 27 90 Jul Jul Jul Jul

4 11 18 25

7.33 7.23 7.17

7.24 7.20 7.17

8.24 8.10

7.99

1000 10.00

NOTE Weekly data for columns 1 through 11 re salemen week averges Data In column 7 are aken from Donoghues Money Fund Report Columns 12 13 and 14 are 1 day quotes for Friday Thursday or Frday. respectively following the end of the sumn wek Column 13 Is the Bond Buyer revenue Index Column 14 Is the FNMA purchase yield. plus loan servicing lee on 30-day mandaory dellvely commitments Column 15 Is the average contract ale on new commlmenls forllxed-ralemorgao(FRMs) whSO percenl loan-to value ratios at major Institutional lenders Column 1 Is the average Inlial contract rate on new commments for 1 year. adjustable rate morgages(ARMs) at major Insttutonal lenders ofering both FRMs and ARMs with the same number of discount points

p - premlnmary dais

Money and Credit Aggregate Measures

Strictly

Seasonally adjusted

OCT.

Money stock measures and liquid assets Period

nontranmactiont components in M? 3

in M3 only 4

Confidential (FR)

Bank credit M3

total loans and Investments

1990

Domestic nonfinancial debt U S government'

other'

total'

ANN. GROWTH RATES I() : ANNUALLY IQ4 TO 94) 1987 1988 1989

6.3 4.3 0.6

4.3 5.2 4.6

3.6 5.5 5.9

12.0 10.6 -1.3

5.8 6.3 3.3

5.5 7.1 4.7

7.9 7.8 7.5

9.0 8.0 7.4

10.0 9.5 7.8

9.7 9.2 7.7

QUARTERLY AVERAGE 1989-4th QTR. 1990-lst QTR. 1990-2nd QTR. 1990-3rd QTR. pe

5.1 4.8 3.5 41

7.1 6.4 2.9 3

7.7 7.0 2.6 2

-16.6 -10.2 -7.4 -4

2.0 3.0 0.8 1

3.2 3.2 1.4

8.1 5.3 6.5

10.2 6.8 9.5

6.4 5.9 5.9

7.3 6.1 6.8

MONTHLY 1989-SEP. OCT. NOV. DEC.

3.8 8.0 2.0 8.2

6.4 6.9 7.3 7.6

7.1 6.7 9.0 7.5

-22.4 -19.3 -9.2 -10.4

0.1 1.4 3.9 4.0

1.7 2.5 4.1 5.7

6.8 11.4 7.1 1.5

11.7 10.2 11.7 3.6

5.9 6.6 6.6 5.1

7.3 7.4 7.8 4.8

1990-JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEP. pe

0.0 10.0 5.1 3.7 -2.8 6.0 -0.3 10.4 9

3.7 9.2 5.7 2.3 -2.2 2.6 1.7 6.6 6

4.8 8.9 5.9 1.9 -2.0 1.5 2.4 5.3 6

-7.3 -12.5 -15.7 -3.8 -2.9 -6.0 -2.3 -3.8 -14

1.4 4.8 1.4 1.1 -2.4 0.9 0.9 4.6 3

0.9 2.9 4.9 2.9 -6.9 5.1 2.9

2.9 9.2 10.0 5.2 3.2 7.1 6.9 10.3

4.1 8.4 12.8 7.4 7.2 14.3 13.6 19.1

5.2 6.7 6.9 6.5 4.5 4.2 5.6 6.0

5.0 7.1 8.3 6.7 5.2 6.6 7.5 9.1

LEVELS ($BILLIONS) : MONTHLY 1990-APR. MAY JUNE JULY AUG.

807.3 805.4 809.4 809.2 816.2

3277.9 3271.8 3279.0 3283.7 3301.8

2470.6 2466.4 2469.5 2474.5 2485.5

796.0 794.1 790.1 788.6 786.1

4073.9 4065.9 4069.1 4072.3 4087.8

4928.6 4900.4 4921.3 4933.1

2646.7 2653.8 2669.4 2684.7 2707.8

2329.1 2343.0 2370.9 2397.8 2436.0

7681.5 7710.5 7737.8 7773.7 7812.6

6 13 20 27

813.0 815.1 818.3 815.7

3290.5 3298.2 3305.1 3303.5

2477.5 2483.2 2486.8 2487.8

790.8 785.7 782.2 786.6

4081.3 4083.9 4087.4 4090.1

3 10 p 17 p

820.0 820.7 820.7

3316.7 3317.7 3316.1

2496.7 2497.0 2495.4

784.7 779.9 777.6

4101.4 4097.6 4093.7

MEEKLY 1990-AUG.

SEP.

10010.6 10053.6 10108.7 10171.5 10248.6

Oebt data are on a monthly average basis, derived by averaging end-of-month levels of adjacent months, and have been adjusted to remove discontinuities. p-preliminary

pe-preliminary estimate

Strictly Confidential (FR)-

F O MC Class II

Components of Money Stock and Related Measures seasonally adjusted unless otherwise noted

Small

Period .__I

LEVELS I(BILLIONSI : ANNUALLY (4TH QTR.) 1987 1988 1989

1__ t I

1 i -I

-1

denomi-

Overnight

RPs and Eurodollars NSA' I

nation time

Savings deposits

MMDAs

deposits' I

Money market mutual funds general Institu. purpose tions and broker/ only dealer

1990

Large Shortterm Treasury securities

denomi-

Term

nati6n time deposits' I

Savingt bonds

Eurodollars NSA' 1

195.0 210.7 220.8

291.5 287.6 279.5

260.5 280.4 283.1

87.6 83.3 76.1

529.3 504.9 479.9

416.2 428.2 407.7

903.6 1021.6 1138.9

220.5 237.5 308.0

87.2 86.7 101.5

482.3 538.0 560.7

107.4 123.2 105.1

218.6 219.3

278.5 278.1

276.0 278.4

78.5 75.2

468.2 471.9

404.0 405.5

1130.0 1132.6

287.8 295.9

101.4 101.6

570.5 565.6

OCT. NOV. DEC.

220.0 220.4 221.9

280.0 278.8 279.7

280.8 282.8 285.7

75.7 75.3 77.4

475.3 480.8 483.7

406.1 407.9 409.0

1135.9 1138.5 1142.3

302.7 309.0 312.4

101.1 101.1 102.3

1990-JAN. FEB. MAR.

224.6 226.6 228.4

277.3 280.2 279.3

285.4 287.0 289.5

81.9 82.8 82.4

485.0 489.4 494.9

410.2 413.6 414.6

1143.0 1142.6 1146.4

318.6 325.3 325.9

APR. MAY JUNE

230.1 231.6 233.4

277.8 274.5 274.5

291.8 291.5 293.8

79.8 83.9 82.5

498.8 500.0 501.2

415.8 415.0 415.8

1147.7 1149.0 1147.1

JULY AUG.

235.4 238.3

274.8 278.0

291.3 291.9

83.9 82.7

502.4 505.5

416.3 416.3

1148.3 1149.6

MONTHLY 1989-AUG. SEP.

1. 2. 3. 4.

Currency

Other checkable deposits

Demand deposits

OCT.

Bank er acceptances

Commercial paper' I

92.4 102.7 80.2

99.8 108.8 116.8

261.9 267.0 322.3

258.4 326.2 349.7

44.5 40.7 40.6

117.6 113.9

89.8 85.5

115.0 115.7

300.3 311.5

354.3 350.3

42.6 41.0

562.7 561.0 558.3

109.6 108.9 96.9

80.1 79.3 81.1

116.2 116.8 117.5

317.6 318.8 330.6

350.0 351.3 347.9

40.0 40.5 41.2

103.2 103.7 105.4

554.5

93.6 96.9 95.2

74.1 68.8 67.2

117.7 118.2 119.1

334.3 330.4 347.8

343.3

544.1

344.7 342.7

40.7 38.3 37.0

325.8 320.4 321.9

106.8 107.3 107.3

538.3 535.3 532.7

94.8 95.8 98.7

66.0 67.5 64.3

119.9 120.7 121.5

341.5 328.9 346.6

357.5 349.6 349.4

35.8 35.3 34.6

325.1 333.8

108.9 114.0

530.4 524.0

97.1 99.1

64.0 65.5

122.4

356.9

348.7

32.8

550.1

Net of money market mutual fund holdings of these items. Includes retail repurchase agreements. All IRA and Keogh accounts at commercial banks and thrift institutions are subtracted from small time deposits. Excludes IRA and Keogh accounts. Net of large denomination time deposits held by money market mutual funds and thrift institutions. p-preliminary

September 28, 1990

Treasury bills Pe

ri od

1987 1988 1989

Period NRedpn

Net purchases

Redmptions (-)

Treasurycoupons Not purchases 3 4

Nt Nt change

9,329 2,200 12.730

3,905 5,435 -11,263

---Q1 ---02 --- 03 ---Q4

-3,842 2,496 -6,450 9,264

2.200 2,400 3,200 4,930

-6.042 96 -9,650 4,333

1990 ---01

-3,799 10,892

1,400

-5,199 10,892

-1,414 8.794 1,883

1,400 3,530

-1,065 -3,277 543 5,796 3,365 1,732 287 4,197

1,000 400

---02 1989 October November

December 1990 January February March April May June July

August

~.. -.

purchases 5-10

1-5

13,233 7,635 1,468

1989

STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC

NET CHANGES IN SYSTEM HOLDINGS OF SECURITES 1 Millions of dollars, not seasonally adjusted

3,359 2,176 327

100 50

Redemptions (

over 10

9,779 4,685 946

2,441 1,404 258

1,858 1,398 284

-228 1,361 -163 -24

-20 287 -9

284

100 100

500 -

Net Change

Federal agencies

Net change outright

redemptions

holdings total 5

Net RPs

20,994

17,366 9,665 1,315

276 587 442

14,513 -10,390

-11,033 1,557 -1,683

-248 2,104 -172 -369

188 125 99 31

-6,477 2,075 -9,921 3,934

-5,591 924 -893 3,877

200 150

-5,000 10,964

-4,061 509

-3,368 5,419 1,883

463 -453 3,867

-2,065 -3,677 742 5,818 3,365 1,782 254 4,160

-8,435 4,417 -43 -1,260 -378 2,146 2,863 1,110

-1 68 33

321 4,727 -4,620 2,483

201 624 486 25 52

3,997 -2.210 -4,157 3,283

-2,814 5,264 1,883

30 1

-2.065 -3,677 543 5,796 3,365 1,732 287 4,197

33 37

Weekly July July

July

68 65

July

August August August August August September September September

Memo: LEVEL (bil $) 7 September 26

3,077

481

117.5

25.1

59.7

13.2

24.5

246.4 '

1. Change from end-of-period to And-of-period 2. Outright transactions in market and with foreign accounts a 3. Outnght transactions in mar"et and vwth'orlg ccounts, and short-term notes acquired in exchange for maturing bills Excludes matunty shirts and rollovers of maturing Issues. 4 Weekly net purchases of Treasury couoons are summed overall maturites.

5. Reflects net change in redemptions (-) of Treasury and agency securities. 6. Includes change In RPs (+), matched sale-piurchase transactions (-), and matched purchase sale transactions (+). 7. The levels of agency issues were as follows: with.in September 26

1 year 2.4

1-5 2.6

5-10 .1

over 10 0.2

total 6.3

4,774 -,202 3,762

-6.1

Cite this document

APA

Federal Reserve (1990, October 1). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19901002

BibTeX

@misc{wtfs_bluebook_19901002,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1990},
  month = {Oct},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19901002},
  note = {Retrieved via When the Fed Speaks corpus}
}