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. 1 In some cases, original copies needed to be photocopied before being scanned into electronic format. 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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. December 15, Strictly Confidential (FR) 1989 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 December 15, 1989 MONETARY POLICY ALTERNATIVES Recent Developments (1) Since the FOMC meeting on November 14, open market operations have been aimed at maintaining the reserve conditions established after the slight easing in early November. The allowance for adjustment and seasonal borrowing incorporated in the nonborrowed reserve objective remained at $200 million until a technical adjustment to $150 million was made in the second full maintenance period to take account of a further decline in seasonal borrowing.1 8-1/2 percent. Federal funds have traded mostly around The funds rate dropped notably below this level around Thanksgiving, however, after market participants erroneously concluded that policy had been eased again. A reserve injection just before Thanks- giving to meet a sizable seasonal need at a time when federal funds were at 8-3/8 percent triggered this perception, which was subsequently reversed by draining reserves the following Monday at an early hour. The ne- cessity to drain reserves at a time when projections pointed to a reserve shortfall contributed to a bulge in borrowing to $419 million in the main- 1. Seasonal borrowing declined from $150 million immediately after the last FOMC meeting to $90 million in the maintenance period ended Wednesday, December 13. 2. The reserve injection on Wednesday was in the form of a 5-day System RP over the period spanning Thanksgiving and the subsequent weekend. The market's perception of ease was reinforced by a newspaper's stories on Friday reporting confirmation by "government officials." Reserves were absorbed on Friday, but the federal funds rate did not return to around 8-1/2 percent until the earlier than usual draining operation on Monday. tenance period ending November 29. In the second and most recent complete period, borrowing averaged $130 million. (2) With no change in policy and incoming economic information generally consistent with expectations of slow growth in the economy, most market interest rates are little changed on balance from the last FOMC meeting. The yield curve remains inverted at the short end, as it has since late October, suggesting the market continues to expect further declines in short-term rates. (3) In long-term markets, the gap between the average yield on lower grade junk bonds and other market rates has widened further, as investor resistance to these securities intensified in the face of further problems among issuers. Partly in response to difficulties in the junk bond market in recent months, the pace of net equity retirements in the fourth quarter has been well below that of the third. Despite this slow- down and disappointing third-quarter corporate earnings, most major stock indexes advanced 1 to 3 percent over the intermeeting period, with the Dow Jones rising 5 percent. Indexes of thrift and bank stock prices dropped, however, in response to spreading problems in real estate markets. None- theless, the spread between rates on bank money market instruments and Treasury bills remained unusually narrow. (4) The weighted average foreign exchange value of the dollar declined by almost 4 percent over the intermeeting period. The dollar fell by 6-1/2 percent against the mark, mainly reflecting events in Eastern Europe and their supposed favorable implications for the German economy, and by somewhat less against other EMS currencies. The dollar was unchanged against the yen, and fell slightly against sterling. the Desk sold $150 million against the yen. Interest differentials against major industrial countries showed little change over the period; three-month rates in both Germany and Japan eased back a bit, while long bond rates in those countries were about unchanged. Rates in some European countries drifted higher as they resisted downward pressures on their currencies relative to the DM. (5) Growth of M2 picked up a bit further in November, to an 81/2 percent pace, bringing the rate of increase from September to 8-1/4 percent, above the 7-1/2 percent path specified by the Committee for the September-to-December period; preliminary data through December 11 suggest continued robust expansion this month. The strength in M2 reflects ear- lier declines in market interest rates and has been concentrated in its liquid interest-bearing components, where the decreases in opportunity costs have been greatest. Noncompetitive bidders at Treasury auctions have been running down their holdings, providing corroborating evidence of substitution out of market assets. Demand deposits contracted last month, reversing almost one-half of October's surge, and M1 growth slowed to a 31/2 percent rate despite a continued double digit rate of expansion in other checkable deposits. 3 3. The runoff in demand deposits caused total reserves to contract in November, following two months of rapid growth. Expansion of the monetary base also slowed, reflecting, in addition to the weakness in its reserves component, a continued sluggish expansion of currency. (6) M3 expanded at a 6 percent pace in November, the fastest rate since the summer, and the average October-November pace of 5-1/4 percent was above the Committee's expected 4-1/2 percent growth for the September-to-December period. Partial data through the first part of December indicate that this aggregate is continuing to expand at close to its November pace. The acceleration in November occurred as the contrac- tion of the thrift component of managed liabilities in M3 abated. This reflected less aggressive efforts on the part of solvent but capitaldeficient thrifts to shed assets and a hiatus in activities by the Resolution Trust Corporation (RTC). M3 also was boosted last month by strong growth in institution-only MMMFs, since yields on these funds tended to lag the decline in market rates. (7) Expansion of the debt of nonfinancial sectors evidently slowed last month, apparently owing, at least in part, to shifts in financing patterns rather than reductions in borrowing to finance spending. For example, a moderation in business borrowing was accounted for largely by a reduced issuance of junk bonds and a slowing in the pace of equity retirements. In addition, while the federal deficit was about unchanged, borrowing fell as the Treasury drew down its cash balance. And, offerings of state and local securities also were cut back, but mostly in the area of advance refundings. Information on the household sector is sparse; consumer lending at banks continued brisk, probably 4. The RTC neither advanced funds nor resolved any cases in November, though insolvent thrifts continued to enter conservatorship. The pace of resolutions has been slowed by the absence of a formal strategic plan of action (one has been out for public comment) and concerns about insufficient working capital. reflecting a further increase in their share of consumer credit. Growth of real estate loans at banks slowed slightly in November, though this may reflect more caution in commercial lending. (8) All the monetary and debt aggregates are ending 1989 within their annual ranges, as can be seen in the table below, with growth moderating from 1988. Through November, M2 expanded at a 4-1/2 percent rate from the fourth quarter of last year, down 3/4 of a percentage point from 1988. M2 growth was damped by a slowing of growth in nominal income, as Money and Debt Growth (percent) 1988 QIV to Nov. 1989 4.6 M2 1988 5.2 M3 6.3 3.9 M1 4.3 0.3 Nonfinancial debt 9.2 8.1 1. 1989 ranges 3 to 7 3-1/2 to 7-1/2 6-1/2 to 10-1/2 Through October. well as by the lagged effects of the year-long rise in interest rates and opportunity costs that came to an end in March. growth showed a pronounced pattern: Within the year, M2 through midyear higher interest rates and unusually large personal tax payments held the aggregate below its target range; subsequent rate declines and a rebuilding of liquid balances boosted M2 to just below the midpoint of its annual range. The pattern was even more pronounced for M1, given its greater interest elasticity; this aggregate declined at around a 5 percent rate in the first half of the year before rebounding in the second. On balance M1 is about un- changed over the year, and growth of its velocity likely equalled the fastest pace in three decades. Events in the thrift industry have not had much effect on the overall level of M2, although growth was skewed heavily towards its bank deposit and money market mutual fund components. By contrast, M3 growth this year--at 4 percent, a bit above the lower bound of its 3-1/2 to 7-1/2 percent range--has been damped considerably by the liquidation of thrift assets and infusions of funds by the RTC. Although banks probably absorbed some of these assets, many mortgages and mortgagebacked securities apparently were acquired by other investors and thus not financed by M3 liabilities. The expansion of nonfinancial debt decelerated about in line with GNP this year, and it is expected to finish the year about 8 percent above its level in the fourth quarter of 1988, near the midpoint of its 6-1/2 to 10-1/2 percent monitoring range. MONEY, CREDIT, AND RESERVE AGGREGATES (Seasonally adjusted annual rates of growth) pe September October November September to pe November QIV '88 to pe November Money and Credit Aggregates M1 5.7 10.1 3.5 6.8 0.3 M2 7.5 7.8 8.4 8.2 4.6 M3 1.0 4.5 6.0 5.2 3.9 1 n.a. 8.3 ! 8.1 15.2 4.0 9.6 7.5 8.9 11.0 3.0 7.0 -1.8 Total reserves 9.6 8.1 -1.1 3.5 -2.0 Monetary base 7.5 2.8 1.4 2.1 3.1 671 534 328 938 1,020 940 Domestic nonfinancial debt 7.1 8.3 Bank credit 6.2 Nonborrowed reserves Reserve measures 2 Memo: (Millions of dollars) Adjustment plus seasonal borrowing Excess reserves n.a. - not available. pe - preliminary estimate. 1. Through October. 2. 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. Policy Alternatives (9) Three policy alternatives are presented below for Committee consideration. The specifications of alternative B involve federal funds continuing to trade in the 8-1/2 percent area in association with adjustment plus seasonal borrowing of $150 million. Under alternative A, the federal funds rate would decline to the 8 percent area accompanying a decline in adjustment plus seasonal borrowing to $100 million. Federal funds would return to the 9 percent area under alternative C, associated with adjustment plus seasonal borrowing of $200 million. The differences in the borrowing levels among the three alternatives, $50 million, is only half that contained in recent bluebooks. The low level to which seasonal borrowing has fallen, together with the continued close proximity of adjustment borrowing to frictional levels, implies that borrowing probably has become even more unresponsive to the spread between the funds rate and the discount rate. 5 Uncertainties in the relationship between the funds rate and borrowing, even more of a problem at such low levels of borrowing, continue to call for flexibility in the Desk's approach to the borrowing objective. (10) Money growth paths from November to March associated with each alternative are shown in the table below. in the table and charts on the following pages.) (More detailed data appear Boosted by earlier declines in interest rates, M2 growth under all the alternatives would continue fairly strong, running through the first quarter at or above the upper end of its tentative 3 to 7 percent target cone for 1990, though 5. Seasonal borrowing may drop a little further into January, but declines should be less than over the most recent intermeeting period. within the associated parallel band. The outlook for M3 continues to be clouded by considerable uncertainties about thrifts. One source of uncer- tainty pertains to the rate at which solvent but capital-deficient institutions pare assets in order to meet new FIRREA capital requirements. Another is the near-term activity of the RTC; absent provision for working capital early next year, RTC's scope for completing deals and replacing high-cost funds in the first quarter may be limited. As noted above, both RTC activity and S&L asset runoffs appear to have diminished substantially, but we expect these factors to become more important in the months ahead, retarding M3, though not to the degree of late summer and early fall.6 As a consequence, M3 growth is projected to continue below that of M2, leaving this aggregate in March in the middle portion of its tentative range. 6. Alt. A Alt. B Alt. C Growth from November to March M2 M3 Ml 9 6 7-1/2 8 5-1/2 6 7 5 4-1/2 Implied growth from Q4 '89 to March M2 M3 M1 9 6 7-1/4 8 5-1/2 5-3/4 7 5 4-1/4 Associated federal funds rate range 6 to 10 7 to 11 7 to 11 RTC is in the process of resolving several thrifts before year-end. Alternative Levels and Growth Rates for Key Monetary Aggregates M2 M3 M1 Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C Levels in billions 1989 October November December 3176.8 3199.1 3221.2 3176.8 3199.1 3220.7 3176.8 3199.1 3220.2 4027.4 4047.5 4068.5 4027.4 4047.5 4068.2 4027.4 4047.5 4067.9 787.7 790.0 794.2 787.7 790.0 794.0 787.7 790.0 793.8 1990 January February March 3245.2 3268.9 3293.9 3242.2 3262.7 3283.3 3239.2 3256.5 3272.7 4087.8 4107.3 4127.2 4086.5 4103.9 4120.4 4085.2 4100.5 4113.6 799.3 804.3 809.7 798.3 802.1 805.8 797.3 799.9 801.9 7.8 8.4 8.3 7.8 8.4 8.1 7.8 8.4 7.9 4.5 6.0 6.2 4.5 6.0 6.1 4.5 6.0 6.0 10.1 3.5 6.4 10.1 3.5 6.1 10.1 3.5 5.8 8.9 8.8 9.2 8.0 7.6 7.6 7.1 6.4 6.0 5.7 5.7 5.8 5.4 5.1 4.8 5.1 4.5 3.8 7.7 7.4 8.1 6.5 5.6 5.5 5.3 3.8 3.0 Quarterly Ave. Growth Rates 1989 Q1 1.9 Q2 1.2 Q3 7.3 Q4 7.9 1990 Q1 8.8 1.9 1.2 7.3 7.9 8.0 1.9 1.2 7.3 7.9 7.2 3.7 2.9 4.6 4.0 5.9 3.7 2.9 4.6 4.0 5.5 3.7 2.9 4.6 4.0 5.2 -0.4 -5.6 1.5 6.2 7.0 -0.4 -5.6 1.5 6.2 5.8 -0.4 -5.6 1.5 6.1 4.7 Sept 89 to Dec. 89 Nov. 89 to Mar. 90 Dec. 89 to Mar. 90 8.2 8.9 9.0 8.2 7.9 7.8 8.1 6.9 6.5 5.6 5.9 5.8 5.6 5.4 5.1 5.5 4.9 4.5 6.7 7.5 7.8 6.6 6.0 5.9 6.5 4.5 4.0 Q4 Q4 Q4 Q4 Q4 4.6 8.8 8.7 8.7 8.9 4.6 8.0 8.1 8.0 7.9 4.6 7.2 7.6 7.2 6.9 3.9 5.9 5.9 5.9 5.9 3.9 5.5 5.8 5.5 5.4 3.9 5.2 5.6 5.2 4.9 0.4 7.0 6.6 6.9 7.2 0.4 5.8 5.9 5.8 5.8 0.4 4.6 5.2 4.7 4.3 Monthly Growth Rates 1989 October November December 1990 January February March 88 89 89 89 89 to to to to to Q4 89 Q1 90 Jan. 90 Feb. 90 Mar. 90 1989 Target Ranges: 1990 Ranges (Tentative): 3.0 to 7.0 3.0 to 7.0 '3.5 to 7.5 3.5 to 7.5 Chart 1 ACTUAL AND TARGETED M2 Billions of dollars i Actual Level * Short-Run Altematives 3450 -1 3400 -1 3350 -- 3300 The range for 1990 Is the one adoped tentatively at the July Mneetng. _- 3% 3250 -A 3200 -- 3150 -1 3100 -- 3050 I I 111 D J ON 1988 F 111111I MA M I J J 1989 A S ON D I J I F I MA I I M I J J 1990 I I A I S I ON I 3000 D Chart 2 ACTUAL AND TARGETED M3 Billions of dollars 4400 Actual Level Short-Run Altenatives S* 4350 7.5% The range for 1990 is the one adopted S tentaMivly at the Julymeng. 4300 4250 4200 3.5% 4150 4100 4050 4000 <*^ ^ 3950 3900 I I ON D 1988 I I J I F I I MA M J J 1989 I A I S I ON I I D I J F i MA I I M J J 1990 I I~ A I S ON D I1~ 3850 Chart 3 M1 Billions of dollars 875 10% ,- Actual Level ------ Growth From 19880:4 * Short-Run Altematives ..,,850 .-' 5 ' .---- - ' -.- .- -" -7-825 9A - " .-------------------------------------------------------------------- 800 0% 775 -... O I I N D 1988 I J I F M I I I I I I I I I A M J J A S O N D 1989 I I J F I M I I A M I J I J 1990 I A I S I O N o- 750 I 72 725 D Chart 4 DEBT Billions of dollars 10750 - Actual Level * Projected Level The range for 1990 I the one adoped 10500 tentaivey at the July mneint. 10250 10000 9750 9500 9250 9000 1988 1989 SJ 1990 A S O N D -11- (11) The markets have built in some additional easing of policy in the near term, and as federal funds continue to trade around 8-1/2 percent under alternative B, money market rates might firm a little.7 Any tendency for rates to rise is likely to be tempered if incoming information points to sluggish economic growth, consistent with the staff forecast, so that markets retain but push back their expectations of the next easing step. Bond yields are likely to stay around current levels under these circumstances. Bond prices could rally should more definite pros- pects for substantial deficit reduction emerge from the upcoming Administration budget as well as the implications of developments overseas for future defense expenditures. With policy unchanged, the dollar might show little further depreciation, unless key foreign central banks tighten policies further. (12) Under alternative B, M2 would expand at an 8 percent annual rate over the November-to-March period, near the pace of recent months. 8 Growth would continue to be buoyed by previous declines in market interest rates, causing a further reduction in the velocity of this aggregate at a 1-3/4 percent annual rate in the first quarter. Expansion would remain concentrated in its more liquid components, whose opportunity costs have narrowed the most. Small time deposits could strengthen a little now that RTC no longer is providing additional funds to replace high-cost deposits. 7. The federal funds rate may temporarily exceed this level around year-end; markets now appear to have built in funds rates in the area of 10 percent over the long New Year's weekend. 8. The staff does not believe that the availability of foreign currency deposits in the United States beginning in January will have much impact on the monetary aggregates. Such deposits will be excluded from the aggregates, and the amount of shifting to foreign currency accounts from dollar deposits in the aggregates is expected to be small. -12- In these circumstances, intervened thrifts may continue to bid more aggressively to retain or replace maturing brokered deposits, as they have in recent weeks, prompting other depository institutions to raise their offering rates. While most of the small time deposits would come from other M2 sources, some might be diverted from outside M2, given the more favorable deposit rates. Growth in the M1 component would be expected to be around 6 percent over the November-to-March period, sustained by inflows to OCDs and some augmenting of demand deposits around year-end to meet compensating balance requirements. By March, M2 would have grown 8 percent at an annual rate from its fourth-quarter base; but absent any significant changes in the funds rate, M2 subsequently would be expected to moderate to within its tentative annual target cone in the third quarter. (13) M3 is expected to grow at a 5-1/2 percent annual rate under alternative B, in line with its faster pace of October and November. Growth of this aggregate may decelerate over the quarter, damped by runoffs of assets at capital-deficient thrifts as well as by a resumption of RTC activity at insolvent institutions. Credit growth at banks should remain close to the pace of recent months; these institutions will continue to fill some of the void in residential and consumer installment lending and acquisitions of mortgage securities caused by the withdrawal of the thrift industry. (14) Debt of private nonfinancial sectors is expected to continue to grow around the slower pace that has come to prevail in the latter part of 1989. To some extent this may result from a more cautious attitude of -13- lenders facing not only mounting problems in junk bond and real estate markets but also the possibility of greater credit difficulties by household and business borrowers more generally as income growth slows. Residential mortgage borrowing should continue to expand around its recent pace, buoyed by the modest recovery in housing activity in response to reduced mortgage rates. Elsewhere in the household sector, consumer cre- dit growth is expected to strengthen a bit, reflecting a near-term recovery in spending on durables. With the financing gap unchanged and restructuring activity damped, business borrowing should remain around the reduced pace of recent months. The federal government will continue to be a heavy user of credit to finance a still-large federal deficit in the first quarter. Over the November-to-March period, growth of domestic nonfinancial debt is expected to be around 7 percent, placing the debt aggregate in the lower portion of its tentative 6-1/2 to 10-1/2 percent monitoring range for 1990. (15) The easing of policy under alternative A would be a little more than now seems to be anticipated by market participants over coming weeks. In response to a drop in the federal funds rate to the 8 percent area, money market interest rates would decrease about 3/8 percentage point, with the three-month bill trading around 7-1/4 percent. Bond rates should move lower, especially if market participants viewed the economy as being fairly weak so that such a measure would not appreciably raise the risk of higher inflation, though judging from the tepid response of bond markets to the putative easing around Thanksgiving, any declines might be small. The dollar could weaken significantly further. -14- (16) With the further drop in interest rates, growth in M2 would strengthen under alternative A to a 9 percent annual rate over the November-to-March period, placing this aggregate noticeably above the upper end of its tentative growth cone. In the absence of a subsequent tightening of policy, expansion of M2 would be likely to remain quite strong for some time, especially if the lower interest rates fed through to greater spending and demand for money than in the staff forecast. Under alternative A, growth in M3 would firm to a 6 percent rate over the November-to-March period, a bit above the midpoint of its tentative 1990 range. A decline in market rates might not boost M3 in line with previous experience, since higher prices on mortgages and mortgage-backed securities could encourage the sale of assets by thrifts. (17) Alternative C would restrain M2 growth to around the upper bound of its 1990 growth cone by March, putting it on a track toward the middle of its tentative range; such a move would seem to increase the odds on more noticeable progress toward price stability, with assistance from a stronger dollar, albeit with greater risk of an economic downturn. The accompanying slowdown in M3--to an expected 5 percent annual rate over the November-to-March period--would cause this aggregate to drift downward in the lower half of its tentative 1990 growth range. A tightening of policy would come as a surprise to market participants, and short-term interest rates would rise by more than the 50 basis point increase in the federal funds rate. Bond rates initially would rise, though this increase might be retraced if markets came to see the move as part of a longer-term strategy to restrain spending and prices. An aspect of this restraint -15- would be a transition period that involved a weaker outlook for profits, downward pressure on various asset prices, and an intensification of strains in certain vulnerable areas of the financial system, with implications for intermediaries and other lenders. -16- Directive Language (18) Draft language for the operational paragraph, including the standard 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 might (WOULD) or slightly (SOMEWHAT) lesser reserve restraint (MIGHT) would be acceptable in the intermeeting period. The contemplated reserve conditions are expected to be consistent with growth of M2 and M3 over the period from NOVEMBER THROUGH September through December]at annual rates of about MARCH [DEL: 4-1/2]____ and 7-1/2 ____ AND[DEL: 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 7 to 11]percent. persistently outside a range of ____ TO ____[DEL: December 18, 1989 SELECTED INTEREST RATES (percent) Shot -Trm_ I federal tunds &#45;&#45;&#45; 11 Treasury _ I CDs I secondary I ils secondary makt 3-month I II8-mnmhI I 1I 1-ur 2 1 3 1 4 market -mMnh 1 5 comm paper I I money market I muual prime tlnd Irne t-nmlh I 1 I bank U S government conslant matuty yields I user I . 7 .. r - --10 . - - 1l--- 1 Lon-Tmn I corporate I I conventional nome mongages A utiliy I municipal I secondary I recently Bond I market I primary market r I rl an r 1 tlri rt If t a a Ii I . .I.I .I n1 12 1 14.._ 1.13 16 ne 88-- High Low 887 638 816 561 8.26 5.81 933 6.58 818 603 1050 850 936 816 10.73 963 834 764 1133 998 1081 984 89-- High Low 995 846 904 754 9.07 7.35 1023 8.24 919 789 11.50 1050 946 782 1047 9.26 795 719 1173 992 1122 968 Monthly Dec 88 8.76 8.07 8.22 925 800 1050 911 9.11 901 1008 788 1098 1061 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 9.12 9.36 985 984 9.81 953 9.24 8.99 902 884 855 8.27 8.53 8.82 865 8.43 8.15 7.88 790 7.75 764 7.69 8.36 855 8.85 865 841 7.93 7.61 774 774 762 749 920 9.51 1009 9.94 959 920 876 864 878 860 839 833 879 889 914 913 8.96 872 832 825 8.21 800 1050 10.93 1150 11.50 11.50 11.07 10.98 1050 10.50 10.50 10.50 9.20 932 9.61 940 898 8.37 783 813 8.25 802 780 909 917 936 918 8.86 8.28 8.02 811 819 801 7.87 8.93 9.01 917 903 8.83 8.27 8.08 812 8.15 800 7.90 1009 10.25 1037 1033 1009 965 9.54 955 955 939 9.28 763 772 7.85 773 751 7 35 7.28 736 7.52 748 7.39 1097 1103 1147 1132 1090 10 39 1011 1038 10 44 1019 1006 1073 1065 1103 1105 1077 1020 988 999 1013 995 977 Weekly Sep 6 89 Sep 13 89 Sep 20 89 Sep 27 89 896 896 905 902 786 770 7.64 7.80 7.80 7.69 762 780 880 8.75 870 883 823 8.26 825 825 10.50 10.50 10.50 10.50 833 819 811 835 820 815 811 8.27 7.43 7.45 7.59 7.59 10 43 1030 1042 1057 1017 1005 1003 1016 Oct 4 89 Oct 11 89 Oct 18 89 Oct 25 89 9.18 8.93 876 8.72 7.85 767 7.54 755 789 769 754 752 893 874 848 850 827 8.25 820 813 1050 10 50 1050 1050 842 814 792 789 8.27 807 798 7.92 7.50 746 7 47 747 1021 10.24 10 16 1013 1011 995 992 982 Nov 1 89 Nov 8 89 Nov 15 89 Nov 22 89 Nov 29 89 880 869 846 846 8.51 773 778 768 765 764 755 760 751 743 7.43 850 854 838 835 825 811 807 800 798 7 93 1050 1050 10.50 1050 10 50 790 794 777 772 775 791 792 7.88 784 7.85 747 745 739 7.35 731 10 15 1008 996 1006 1007 982 979 972 974 974 Dec 6 89 Dec 13 89 852 847 757 766 735 739 824 832 794 789 10.50 10 50 774 7.78 783 784 735 7.29 1007 998 976 975 Daily Dec 8 89 Dec 14 89 Dec 15 89 846 8.51 761 762 762 733 739 739 1050 1050 10.50 777 770 770p 782 779 781p 89 89 89 89 89 89 89 89 89 89 89 5 8 4p 722 721 713 828 841 837 854 865 868 788 7.85 7 86 p NOTE Weekly data for columns 1 through 11 are slalement week averages Data In column 7 are taken from Donoghue s Money Fund Report Columns 12 13 and 14 are 1 day quotes fot Friday Thursday or Friday respectively followtng 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-pay mandatory delivery commitments Column 15 Is the average contract rate on new commitments or fixed rate mortgages(FRMs) with 80 percent loan to value ratios at major institutional lenders Column 16 Isthe average Initial contract rate on new commitments for 1-year adjuslable-rate mongages(ARMs) at major instltutional lenders offering both FRMs and ARMs with the same number of discounl points preliminary data p Strictly Confidential (FR)FOMC clas Bank Reserves, Money and Credit Aggregate Measures Seasonally adjusted B___________ nk reserv' Period nonborrowed I L M3 M2 base I I 3 4 I 5 Domestic nonfinancial debt total loans U.S. and government' I 6 other' _investments_ 17 18, 1989 total' ____ 10 8 11t 55,725 58,393 58,514 56,532 59,175 60,807 238,801 256,914 274,515 709.4 754.7 787.4 2788.3 2905.7 3057.1 3470.2 3667.7 3897.1 4107.9 4332.0 4639.0 2068.9 2237.6 2409.6 1783.8 1943.7 2098.8 5725.7 6311.1 6916.1 7509.5 8254.9 9014.9 57,991 60,853 60,706 274,381 275,503 786.6 790.3 3059.5 3069.6 3898.1 58,990 3915.4 4635.5 4672.2 2410.2 2417.2 2098.2 2113.5 6920.5 6968.7 9018.7 9082.2 FEB. MAR. 58,708 S8,773 58,041 60,370 60,260 59,854 276,815 277,598 278,676 786.3 787.5 786.3 3065.9 3069.4 3078.5 3920.2 3929.5 3950.8 4676.3 4689.4 4724.5 2422.8 2451.9 2464.9 2121.8 2137.8 2158.7 7017.1 7069.2 9138.9 9207.0 9269.2 APR. MAY JUNE 57,174 57,020 56,860 59,463 58,740 58,350 278,753 278,427 279,060 783.2 773.4 770.3 3080.9 3072.3 3088.0 3958.8 3954.8 3973.4 4750.1 4746.1 4759.0 2470.9 2486.3 2496.8 2168.8 2176.4 2184.2 7158.8 7212.9 7259.9 9327.6 9389.3 JULY 58,698 58,753 59,223 280,014 280,288 282,045 777.2 777.4 781.1 3117.5 3136.5 3156.2 4002.5 4009.0 4012.4 4793.4 4812.9 4824.9 2518.1 2534.4 2544.1 2183.9 2199.9 2220.1 7310.6 7359.0 7395.2 9494.4 AUG. SEP. 58,004 58,079 58,530 OCT. NOV. p 59,066 59,216 59,621 59,565 282,703 283,033 787.7 790.0 3176.8 3199.1 4027.4 4047.5 4853.4 2575.5 2238.3 2259.4 7443.4 7495.8 9681.7 9755.3 MONTHLY 1988-NOV. DEC. 1989-JAN. 1. 2. Ml monetary otal 1 Bank credit Money stock mepilur« pnd liquid assets I LEVELS ISILLIONS) : ANNUALLY 14TH qTR.) 1986 1987 1988 DEC. 2584.0 7110.5 Reserves data are in millions of dollars, and have been adjusted for discontinuities. Debt 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 9444.1 9558.9 9615.3 Sirlctly Confldentlal (FR). Components of Money Stock and Related Measures Cs... easuonlly adjusted unlessl therwis neted Small Period Cunrency deposits Otter Overniht deposits Euredollwr NSA' I LEVELS (tBILLIONS) : ANNUALLY (4TH QTR.) 1986 1987 NSA l deposits r time depets' I Money martr l mutual hnds, NSA purpou n d broIner dealer' 1989 lions only time dpos t,o Tern Term NSA' NSA' I I f I OI Bm.ners Shortbonds I I Treasury ecurilti cil paper' 4, tma.e t 81.0 92.2 102.5 89.8 99.6 108.7 280.5 263.0 268.4 229.8 257.0 323.9 37.5 101.6 105.8 108.7 124.1 109.1 264.5 271.3 323.7 335.8 40.5 40.6 544.4 551.6 558.8 125.2 128.4 130.9 100.7 100.0 105.5 109.7 110.6 111.5 270.9 265.2 271.7 334.9 344.2 349.2 40.6 39.9 41.2 128.8 129.2 95.1 567.7 572.1 573.0 101.3 100.5 99.3 112.3 112.9 113.8 278.1 285.0 279.3 359.5 352.3 351.4 41.4 41.1 41.1 96.2 100.6 99.1 573.1 569.1 563.7 124.5 118.0 113.7 99.7 97.6 93.8 114.6 285.5 294.8 115.2 115.7 283.0 290.7 307.4 351.3 355.3 348.0 42.0 42.7 41.3 301.5 309.8 96.7 102.0 560.9 560.0 110.3 110.9 90.4 91.6 116.1 318.4 352.2 39.4 229.1 260.8 260.9 77.9 61.3 76.7 569.1 529.9 505.6 361.8 416.7 430.8 859.5 900.8 1017.6 207.6 219.7 236.0 MONTHLY 1968-NOV. DEC. 210.5 211.8 287.7 288.6 281.0 282.3 75.7 78.5 506.7 502.7 431.8 431.3 1017.8 1025.2 237.4 1969-JAN. FEB. MAR. 213.4 214.3 284.0 284.8 264.3 281.3 280.9 279.1 81.9 79.0 77.5 495.2 485.3 i 480.3 427.8 424.6 420.8 1035.7 1048.3 1061.0 APR. AY JUNE 216.0 216.5 217.3 281.4 278.2 275.0 278.5 271.4 270.7 74.5 73.5 76.0 S471.3 i457.0 456.9 412.8 404.7 402.0 JULY AUG. SEP. 218.0 218.4 219.4 278.8 277.5 277.3 273.2 274.4 277.3 77.6 74.9 72.3 459.8 465.4 469.1 OCT. NOV. p 219,7 220.3 280.4 278.9 280.3 283.3 73.5 72.5 473.0 482.1 215.6 186 Largei deonmi. I 179.4 294.5 194.9 I 292.0 288.4 210.7 1988 1. 2. 3. 4. 4 denJm- DEC. FOMC 440.8 84.7 87.2 86.5 82.6 481.6 110.0 534.7 125.9 87.4 I 534.4 128.3 537.8 241.7 247.1 255.5 89.3 89.6 87.6 1083.1 1105.7 1118.5 259.3 259.0 265.1 67.7 91.6 401.5 402.3 404.2 1126.3 1132.1 1132.6 274.5 405.8 409.4 1132.0 1131.1 239.4 I 7.6 I 129.3 44.6 40.8 Net of *onr market mutual fund holdings of these items. Include reil repurchse agrements. All IRA and Keogh ccounts at commrcial 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-pr liminary 1 NET CHANGES IN SYSTEM HOLDINGS ON SECURITIES Millions of dollars, not seasonally adjusted December 18, 1989 *1- STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC 7 . Treasurv hills. .. cou - ons Treasur Net purchases Period Net purchases2 1984 1985 1986 1987 1988 Redemptions Net change (-) 11,479 18,096 20,099 12,933 7,635 7,700 3,500 1,000 9,029 2,200 3,779 14,596 19,099 3,905 5,435 1988--Q1 Q2 Q3 04 319 423 1,795 5,098 2,200 -1,881 423 1,795 5,098 1989--01 02 Q3 -3,842 2,496 -6,450 2,200 2,400 3,200 -6,042 96 -9,650 -3,688 1,600 -5,288 3,077 -10 -571 -5,516 -934 1,200 1,200 2,400 800 3,077 -1,210 -1,771 -7,916 -1,734 -1,414 8,794 1,400 3,530 -2,814 5,264 4 11 18 25 -151 -218 -640 -625 600 400 400 1 8 15 22 29 219 3,258 3,530 6 13 1989--February March April May June July August September October November Oct. Nov. Dec. Memo: -- within 1-year I SRedemptions (-) Net change - Federal Net change agencies outright redemptions holdings total (-) t 44 1-5 5-10 over 10 I 826 1,349 190 3,358 2,177 1,938 2,185 893 9,779 4,686 236 358 236 2,441 1,404 441 293 158 1,858 1,398 3,440 4,185 1,476 17,366 15,099 6,964 18,619 20,178 20,994 14,513 1,450 3,001 10,033 -11,033 1,557 1,092 -800 3,661 -175 1,017 966 -975 6,737 1,084 1,824 562 432 3,903 -3,011 7,030 1,717 8,776 -3,514 5,220 1,393 -1,541 172 -228 1,361 -163 -20 287 -9 284 -248 2,104 -172 -6,477 2,075 -9,921 -5,591 924 -893 -225 -5,553 2,179 -75 -5,131 -1,285 -1,771 -7,983 -1,884 54 -3,368 5,419 2,079 -856 14,448 -23,527 10,002 -5,152 617 3,641 463 -453 -651 -818 -1,064 -1,055 -689 -4,431 4,990 -6,066 -225 172 1,436 -75 286 -13 -150 -9 284 -22 -150 -24 -524 155 155 151 -818 -1,040 -1,025 -500 -24 -24 Net RPs -- 219 -272 219 -272 663 233 &#45;&#45;&#45; 663 233 818 233 5,662 -885 -507 2,573 10,349 4,876 947 -- 4,876 947 4,876 947 -13,117 4,000 - 6 LEVEL (bil.$) December 13 105.9 .. 29.5 i. Change from end-of-period to end-of-period. 2. Outright transactions in market and with foreign accounts. 3. Outright transactions in market and with foreign accounts, and short-term notes acquired in exchange for maturing bills. Excludes maturity shifts and rollovers of maturing coupon issues. 53.5 12.5 26.7 122.2 234.7 -1.4 4. Reflects net change and redemptions (-) of Treasury and agency securities. 5. Includes change in RPs (+), matched sale-purchase transactions (-), and matched purchase sale transactions (+). 6. The levels of agency issues were as follows: within over 10 total 1-5 5-10 1-year 2.1 3.2 1.0 0.2 6.5 5 

Federal Reserve (1989, December 18). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19891219

@misc{wtfs_bluebook_19891219,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1989},
  month = {Dec},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19891219},
  note = {Retrieved via When the Fed Speaks corpus}
}