Greenbook/Tealbook

Prefatory Note

The attached document represents the most complete and accurate version available based on original files from the FOMC Secretariat at the Board of Governors of the Federal Reserve System. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act.

Content last modified 03/07/2014.

Confidential (FR) Class III FOMC

January 25, 2008

CURRENT ECONOMIC AND FINANCIAL CONDITIONS Supplemental Notes

Prepared for the Federal Open Market Committee by the staff of the Board of Governors of the Federal Reserve System

Contents

The Domestic Nonfinancial Economy ......................................................1 Sales and Prices of Existing Homes.............................................................1 Charts Indicators of Single-Family Housing...........................................................2 The Domestic Financial Economy ...........................................................1 Tables Commercial Bank Credit .............................................................................3 Selected Financial Market Quotations .........................................................4

ii

Supplemental Notes The Domestic Nonfinancial Economy

Sales and Prices of Existing Homes Sales of existing single-family homes declined 2 percent in December to an annual rate of 4.31 million units; data on pending home sales through November and other indicators of housing demand had instead implied a small increase. Still, existing home sales continue to paint a noticeably less downbeat picture of housing demand than do the data on sales of new single-family homes. Sales of condos and co-ops also moved down in December, and the declines in total existing home sales were spread across all four Census regions. The average price of existing single-family homes sold fell 5 percent in the twelve months ending in December, similar to the readings for this series seen in recent months.

The Domestic Financial Economy

-1-

2

Indicators of Single-Family Housing

Existing Single-Family Home Sales

New Single-Family Home Sales

Millions of units _ (annual rate) 70 Pending home sales index (right scale) - - Existing home sales (left scale) 6.5

Index

140 130

6.0

--

Millions of units (annual rate) 0.4

NAHB sales (right scale) Census sales (left scale)

5

0.40

1.3

120

5.5

0.35 1.1

110

5.0

0.30

0.9

4.5

100

4.0

90

3.5

0.25

0.7

0.20

Source. For NAHB new home sales, NAHB's survey of large homebuilders; for new home sales agreements, Census Bureau.

Source. National Association of Realtors.

Content partially redacted.

_ 15

Millions of units (annual rate)

New Home Sales Months' Supply

Mortgage Rates Months Nov.

Percent

10

9 8

30-year jumbo FRM 30-year conforming FRM 1-year conforming ARM

7

9 8 7

6 5

6

4 5

3 2

4

0

1999

Note. . Months' Sl.Jpply is calculated using the 3-month moving average of sales. Source. for months' supply, Census Bureau.

Note. The Jan. readings are for data through Jan. 23, 2008. Source. Conforming rates are from Freddie Mac. The jumbo rate is the sum of the 30-year conforming FRM rate and the jumbo conforming spread from bankrate.com.

Prices of Existing Homes Percent change from year earlier Repeat transactions, purchase-only index Average price of homes sold Case-Shiller price index

Prices of New Homes 35 30

Percent change from year earlier Constant quality index Average price of homes sold

25 20

25 15

20 15

10

10

5

5 0

0

-5 -5

-10 ~~~~~~~~~~~~~~~~~~~-15

Note. The Case-S hiller price index is the 10-city index. Source. For repeat transactions, OFHEO; for average price, National Association of Realtors; for Case-Shiller, Chicago Mercantile Exchange.

Note. Average price values have been adjusted by Board staff to take into account new sampling procedures adopted in 2005. Source. Census Bureau.

3

Commercial Bank Credit (Percent change, annual rate, except as noted; seasonally adjusted) Type of credit

Total

Level1 Jan. 2008e

2006

H1 2007

Q3 2007

Q4 2007

Dec. 2007

Jan. 2008e

9.8

9.3

12.4

9.1

8.6

4.7

8,772

Loans2 Total To businesses Commercial and industrial Commercial real estate

10.9

10.2

12.5

11.6

12.4

9.0

6,695

16.5 13.7

10.1 13.8

24.2 3.8

29.9 7.7

21.3 7.4

14.6 2.9

1,432 1,580

To households Residential real estate Revolving home equity Other Consumer Originated3 Other4

7.0 1.4 9.1 5.9 6.9 11.8

7.0 1.9 8.7 6.5 5.2 14.3

9.6 6.5 10.6 10.5 10.3 19.1

1.0 12.2 -2.7 7.2 7.2 17.5

3.0 13.1 -.5 17.8 13.2 21.4

4.0 8.5 2.5 -.1 5.3 28.2

1,881 485 1,396 802 1,205 1,000

6.5 2.6 13.2

6.5 -4.9 24.1

12.2 6.8 19.4

1.6 -23.9 34.6

-3.2 -11.7 6.4

-9.3 -19.9 2.3

2,077 1,078 999

Securities Total Treasury and agency Other5

Note. Yearly annual rates are Q4 to Q4; quarterly and monthly annual rates use corresponding average levels. Data have been adjusted to remove the effects of mark-to-market accounting rules (FIN 39 and FAS 115), the consolidation of certain variable interest entities (FIN 46), the adoption of fair value accounting (FAS 159), and the effects of sizable thrift-to-bank and bank-to-thrift structure activity in October 2006, March 2007, and October 2007. Data also account for breaks caused by reclassifications. 1. Billions of dollars. Pro rata averages of weekly (Wednesday) levels. 2. Excludes interbank loans. 3. Includes an estimate of outstanding loans securitized by commercial banks. 4. Includes security loans and loans to farmers, state and local governments, and all others not elsewhere classified. Also includes lease financing receivables. 5. Includes private mortgage-backed securities, securities of corporations, state and local governments, foreign governments, and any trading account assets that are not Treasury or agency securities, including revaluation gains on derivative contracts. e Estimated.

4 III-T-1

Selected Financial Market Quotations (One-day quotes in percent except as noted) 2006

2007

2008

Instrument

Change to Jan. 24 from selected dates (percentage points)

June 29

Sept. 17

Dec. 10

Jan. 24

2006 June 29

2007 Sept. 17

2007 Dec. 10

5.25

5.25

4.50

3.50

-1.75

-1.75

-1.00

4.88 5.06

4.05 4.15

2.98 3.20

2.32 2.41

-2.56 -2.65

-1.73 -1.74

-.66 -.79

Commercial paper (A1/P1 rates)2 1-month 3-month

5.27 5.37

5.23 5.25

4.36 4.94

3.11 3.06

-2.16 -2.31

-2.12 -2.19

-1.25 -1.88

Large negotiable CDs1 3-month 6-month

5.47 5.59

5.52 5.36

5.18 4.98

3.20 3.08

-2.27 -2.51

-2.32 -2.28

-1.98 -1.90

Eurodollar deposits3 1-month 3-month

5.33 5.49

5.55 5.60

5.40 5.25

3.30 3.25

-2.03 -2.24

-2.25 -2.35

-2.10 -2.00

Bank prime rate

8.25

8.25

7.50

6.50

-1.75

-1.75

-1.00

Intermediate- and long-term U.S. Treasury4 2-year 5-year 10-year

5.26 5.15 5.28

4.12 4.18 4.58

3.17 3.55 4.33

2.23 2.86 3.87

-3.03 -2.29 -1.41

-1.89 -1.32 -.71

-.94 -.69 -.46

U.S. Treasury indexed notes5 5-year 10-year

2.51 2.61

2.04 2.15

1.42 1.94

.87 1.45

-1.64 -1.16

-1.17 -.70

-.55 -.49

Municipal general obligations (Bond Buyer)6

4.71

4.46

4.38

4.29

-.42

-.17

-.09

Private instruments 10-year swap 10-year FNMA7 10-year AA8 10-year BBB8 10-year high yield8

5.81 5.59 6.20 6.74 8.74

5.17 5.01 6.05 6.46 8.95

4.89 4.83 6.08 6.55 9.23

4.25 4.27 5.68 6.31 9.98

-1.56 -1.32 -.52 -.43 1.24

-.92 -.74 -.37 -.15 1.03

-.64 -.56 -.40 -.24 .75

Home mortgages (FHLMC survey rate) 30-year fixed 1-year adjustable

6.78 5.82

6.34 5.65

6.11 5.50

5.48 4.99

-1.30 -.83

-.86 -.66

-.63 -.51

Short-term FOMC intended federal funds rate Treasury bills1 3-month 6-month

Record high

2007

2008

Stock exchange index Dow Jones Industrial S&P 500 Composite Nasdaq Russell 2000 Wilshire 5000

Change to Jan. 24 from selected dates (percent)

Level

Date

Sept. 17

Dec. 10

Jan. 24

Record high

2007 Sept. 17

2007 Dec. 10

14,165 1,565 5,049 856 15,807

10-9-07 10-9-07 3-10-00 7-13-07 10-9-07

13,403 1,477 2,582 776 14,839

13,727 1,516 2,719 791 15,311

12,379 1,352 2,361 693 13,608

-12.61 -13.61 -53.24 -19.05 -13.91

-7.65 -8.44 -8.55 -1.71 -8.30

-9.82 -1.81 -13.17 -12.45 -11.12

1. Secondary market. 2. Financial commercial paper. 3. Bid rates for Eurodollar deposits collected around 9:30 a.m. eastern time. 4. Derived from a smoothed Treasury yield curve estimated using off-the-run securities. 5. Derived from a smoothed Treasury yield curve estimated using all outstanding securities and adjusted for the carry effect. 6. Most recent Thursday quote. 7. Constant-maturity yields estimated from Fannie Mae domestic noncallable coupon securities. 8. Derived from smoothed corporate yield curves estimated using Merrill Lynch bond data. _______________________________________________________________________ NOTES: June 29, 2006, is the day the most recent policy tightening ended. September 17, 2007, is the day before the most recent policy easing began. December 10, 2007, is the day before the most recent FOMC announcement. _______________________________________________________________________