Greenbook/Tealbook

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. 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. CONFIDENTIAL (FR) CLASS III - FOMC March 28, 1986 SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System TABLE OF CONTENTS THE DOMESTIC FINANCIAL ECONOMY Mortgage Activity at FSLIC-Insured Institutions . . . . . . . Tables Mortgage activity at FSLIC-insured institution . . . Monetary aggregates . . . . . . . . . . . . . . . . Commercial bank credit and short- and intermediateterm business credit . . . . . . . . . . . . . . . Selected financial market quotations . . . . . . . . . . . . . . . . . . . . . . . . INTERNATIONAL DEVELOPMENTS U.S. Merchandise Trade . . . . . . . . . . . . . . . . . . . . SUPPLEMENTAL NOTES THE DOMESTIC FINANCIAL ECONOMY Mortgage Activity at FSLIC-Insured Institutions The volume of mortgage-related assets held at FSLIC-insured thrifts rose for the eighth consecutive month, increasing by a seasonally adjusted $2.9 billion in February. Mortgage originations at this sample of thrifts subsided somewhat in February from the accelerated pace of the previous two-month period, though at $17.8 billion they remained historically strong. Loan retirements rose for the second straight month (data not shown) and reached a new high in February, consistent with information from other sources concerning a pickup in mortgage refinancing activity. MORTGAGE ACTIVITY AT FSLIC-INSURED INSTITUTIONS (Billions of dollars, seasonally adjusted) Mortgage transactions Net change in mortgage assets1 Mortgage Mortgage-backed Originations (1) Sales (2) Total (3) loans (4) securities (5) 1985-Jan. Feb. Mar. Apr. May June July r Aug. r Sept.r Oct. r Nov. r Dec. r 15.0 15.0 14.7 15.9 16.1 14.3 14.9 16.0 16.8 19.4 18.6 20.2 6.3 6.4 6.2 6.4 7.6 7.8 10.5 7.7 9.8 10.9 12.8 11.1 4.1 3.1 4.2 4.1 2.3 -2.2 2.4 6.6 9.3 5.1 3.7 5.1 4.5 2.9 4.8 4.5 3.2 2.8 4.7 4.9 4.3 6.4 3.1 4.5 -. 4 .2 -. 6 -. 4 -. 9 -5.0 -2.3 1.7 5.0 -1.3 .6 .6 1986-Jan. r Feb. p 18.4 17.8 9.2 9.7 5.5 2.9 3.4 2.0 2.1 1.0 1. Data are adjusted to account for structural changes through mergers, acquisitions, liquidations, terminations, or de novo institutions. p--preliminary. r--revised. MONETARY AGGREGATES (Based on seasonally adjusted data unless otherwise noted) 1984:04 to 1985:04 ---11.9 8.6 7.7 1. M1 2. M2 3. M3 1985 Q4 Q1Pe Jan. 1 1986 Feb. March 28, 1986 Mar.Pe Growth from Q4 1985 to Mar. 1986Pe1 Percentage change at annual rates 10.6 6.0 6.4 7-3/4 4-1/4 7-1/4 5 7-1/4 Levels in billions of dollars Feb. 1986 Selected components 4. Currency 7.5 7.4 5. Demand deposits 8.6 7.7 3 22.2 18.5 15-1/2 7.6 4.6 3-1/4 18.5 23.6 9.3 9.1 6. Other checkable deposits 7. M2 minus M12 8. 9. 10. 11. 12. 13. 14. 15. 16. Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money market mutual fund shares, NSA Commercial banks Savings deposits, SA, plus MMDAs, NSA3 Small time deposits Thrift institutions Savings deposits, SA, plus MMDAs, NSA3 Small time deposits 4 M3 minus M2 7.0 7 172.9 -11.5 0.9 19 269.1 12.8 17.3 16 183.0 1.4 2.4 6 1945.2 7-11'4 -34.7 -3.6 34 67.0 0.9 5.3 10-1 /2 7-1 /4 8.2 9.8 21.6 2.8 31 7 180.9 850.0 19.0 -0.6 5.1 11.2 -1.6 1.4 8-3 /4 5-1 /4 4-1 /2 11.8 7.5 4.2 1.3 4.7 6.3 10 3 7 462.0 388.0 862.4 13.7 -0.4 7.4 -2.9 1 7 -1.3 8.2 3.3 8.4 5 8 359.3 503.1 6 662.5 -3 -17 24 451.0 291.3 159.7 11.1 -4.4 -3.7 - MERORANDA: 23. Managed liabilities at commercial banks (24+25) Large time deposits, gross 24. Nondeposit funds 25. Net due to related foreign 26. institutions, NSA 27. Other 6 28. 9.1 3.9 Large time deposits 5 At commercial banks, net At thrift institutions Institution-only money market mutual fund shares, NSA Term RPs, NSA Term Eurodollars, NSA 7-1/2 8.2 18-3/4 35.7 16.3 10.8 14.1 5.2 15-1/4 18-1/2 10 31.3 45.6 6.9 8.6 6.6 11.4 3.1 39.2 -4.5 25 46 -3-1/2 40.9 51.1 -20.2 7.2 33.3 44.3 67.2 70.4 78.7 Average monthly change in billions of dollars - 2.3 1.0 1.3 6.2 2.3 3.9 7 3-1/2 3-1/2 0.4 1.0 0.8 3.1 3/4 2-3/4 3.1 2.4 0.8 6.0 -3.2 -0.5 1.3 3 -4 8-3/4 -1-1/2 10-1/4 477.8 351.8 126.1 -22.2 148.3 deposits at commercial U.S. government 7 -5 21.1 0.2 0.9 -1/2 1.5 2.1 banks Dollar amounts shown under memoranda for quar1. Quarterly growth rates are computed on a quarterly average basis. terly changes are calculated on an end-month-of-quarter basis. 2. Nontransactions M2 is seasonally adjusted as a whole. 3. Growth rates are for savings deposits, seasonally adjusted, plus money market deposit accounts (MMDAs), not seaCommercial bank savings deposits excluding MMDAs increased during February and March 1986 sonally adjusted. institutions, savings deposits excluding MMDAs At thrift at rates of 2.9 percent and 5 percent, respectively. increased during February and March 1986 at rates of 4.0 percent and 6 percent, respectively. 4. The non-M2 component of M3 is seasonally adjusted as a whole. institutions. 5. Net of large-denomination time deposits held by money market mutual funds and thrift 6. Consists of borrowings from other than commercial banks in the form of federal funds purchased, securities sold for borrowed money (including borrowings from the Federal under agreements to repurchase, and other liabilities Data are partially estimated. Reserve and unaffiliated foreign banks, loan RPs and other minor items). 7. Consists of Treasury demand deposits and note balances at commercial banks. pe-preliminary estimate COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data)1 Levels in Q2 Q3 1985 Q4 1986 Dec. Jan. bil. of dollars Feb.P FebruaryP Commercial Bank Credit -----------1. Total loans and securities at banks 9.3 2. 5.5 Securities 3. U.S. government securities 4. Other securities 0.0 16.1 10.4 Total loans 2.6 Business loans 8.6 12.4 9.0 18.8 7.4 2.4 16.6 15.3 4.3 1926.4 19.6 26.2 24.3 4.0 455.7 -3.5 -18.8 -27.0 28.1 270.8 61.3 103.0 103.8 -29.7 184.9 .9.4 13.7 12.5 4.3 1470.7 5.5 8.1 0.7 2.7 495.3 41.8 28.6 136.4 -36.2 13.0 11.5 8.2 14.1 431.1 11.1 8.8 11.4 12.1 12.9 292.5 12.3 13.5 32.6 26.5 -14.7 210.0 Security loans 87.8 -18.0 Real estate loans 12.4 11.2 Consumer loans 14.9 7.1 Other loans 11.8 5.2 Short- and Intermediate-Term Business Credit --11. Business loans net of bankers acceptances 12. Loans at foreign branches 13. Sum of lines 11 & 12 14. Commercial paper issued by 3 nonfinancial firms 15. Sums of lines 13 & 14 16. Bankers acceptances: 4 5 related , 17. 2.2 7.1 17.0 -4.1 6.2 4.0 2.0 7.1 0.5 33.8 -1.5 36.2 -13.5 3.6 2 0.7 -6.2 3.4 -62.5 0.9 -2.7 0.4 491.5 18.2 509.7 87.5 597.2 7.9 1.5 11.5 11.3 -1.6 -10.8 -6.7 -13.6 25.1 -7.0 n.a. 6.7 1.0 10.1 12.1 -1.9 n.a. 630.7 (Jan) 8.0 3.1 19.2 19.4 18.3 n.a. 153.1 (Jan) 6.9 1.4 11.8 13.5 2.0 n.a. 783.8 (Jan) U.S. trade Line 15 plus bankers acceptances: U.S. trade related 18. Finance company loans to business 19. Total short- and intermediateterm business credit (sum of lines 17 & 18) 4 33.7 (Jan) n.a.-not available. p-preliminary 1. Average of Wednesdays for domestically chartered banks and average of current and preceding ends of months for foreign-related institutions. 2. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestically chartered banks. 3. Average of Wednesdays. 4. Based on average of current and preceding ends of month. 5. Consists of acceptances that finance U.S. imports, U.S. exports and domestic shipment and storage of goods. SELECTED FINANCIAL MARKET QUOTATIONS 1/ (percent) 1982/1983 1984 1985 cyclical low Highs March highs Change from: 1986 FOMC Feb Mar. 27 1984 high FOMC Feb Short-term rates Federal funds 2/ 8.46 11.63 8.58 7.91 7.42 Treasury bills 3/ 3-month 6-month 1-year 7.08 7.62 7.73 10.67 10.77 11.13 8.80 9.13 9.25 7.11 7.19 7.19 Commercial paper 1-month 3-month 8.00 7.97 11.42 11.35 8.94 9.12 Large negotiable CD's 3/ 1-month 8.08 3-month 8.12 6-month 8.20 11.52 11.79 12.30 Eurodollar deposits 4/ 1-month 3-month 8.68 8.71 10.50 Bank prime rate -4.21 -0.49 6.34 6.32 6.37 -4.76 -4.3 -0.Z 7.75 7.68 7.27 -4.15 7.12 -4.23 -0.48 -0.56 8.89 9.29 9.92 7.76 7. 6 7. 7.29 -4.23 7.14 -4.65 7.11 -5.19 -0.47 -0.62 -0.69 11.89 12.20 8.89 9.58 7.91 7.95 7.50 -4.39 7.43 -4.77 -0.41 -0.52 13.00 10.50 9.50 9.00 -4.00 -0.50 10.58 10.74 6.91 7.02 5.99 5.91 -0.92 -1.11 11.22 12.02 11.97 8.19 8.91 9.13 7.13 -6.36 7.49 -6.50 7.63 -6.31 -1.06 -1.42 -1.50 Treasury bill futures June 1986 contract Sept 1986 contract -0.8 -0.82 Intermediate- and long-term rates U.S. Teasury (onstant maturity) 3-year 13.49 9.33 10.12 10-year 13.99 10.27 30-year 13.94 Mnicipal reverue 5/ (Bond Buyer index) 9.21 11.44 10.25 8.24 7.69 -3.75 -0.55 Corporate-A utility 6/ Recently offered 11.64 15.30 13.23 10.45 9.36 -5.94 -1.09 14.68 12.31 13.29 11.14 10.85 8.98 10.01 -4.67 8.67 -3.64 bome mortgage rates 6/ S&L fixed-rate S&L ARM, 1-yr. 12.55 n.a. 1983 1984 1985 Highs Lows Mrch highs 1986 FC Feb Mar. 27 -0.84 -0.31 Percent change frm: 1984 lows FUC Feb Stock prices Dow-Jones Industrial NMSE Ccnposite AMEX Cpite NASDAQ (TC) 1287.20 99.63 249.03 328.91 1086.57 1553.10 1629.93 1821.72 67.66 85.13 121.90 124.67 1.69 61.74 87.16 246.13 24.12 29.81 44.16 225.30 325.16 346.27 373.31 65.69 1/ One-day quotes except as noted. 2/ Averages for two-week reserve maintainence period closest to date shown. Last observation is the maintenance period endirg mrch 26, 1986. 3/ Secondary market. 11.77 10.44 10.52 7.81 4/ Averages for statement week closest to date shown. 5/ Thursday quotes. 6/ Friday quotes. e-estimate INTERNATIONAL DEVELOPMENTS U.S. Merchandise Trade According to data released on Thursday, the United States had a trade deficit in February of $12.5 billion ($150 billion annual rate) on an unrevised, not seasonally adjusted, CIF valuation basis. table below. See the The deficit in February was considerably smaller than the one reported for January. However, these data are subject to large revisions. On a revised basis, the deficit in January was slightly smaller than in December. It appears that for January-February combined exports were about unchanged from fourth-quarter rates and that imports (particularly the price and volume of oil) may be reduced a bit. U.S. Merchandise Trade: CIF Value Billions of dollars, annual rates, NSA Unrevised Statistical Month Exports Imports Balance Revised Statistical Month Exports Imports Balance Year 1985 213.1 361.6 -148.5 212.7 357.3 -144.6 Quarters 1985 - 1 2 3 4 224.6 217.3 201.4 209.3 350.0 368.9 354.7 372.8 -125.5 -151.6 -153.4 -163.5 220.4 219.4 199.4 211.5 338.3 359.8 352.5 378.4 -117.9 -140.4 -153.1 -166.9 208.5 382.2 -173.7 n.a. n.a. n.a. 211.4 212.6 203.9 204.1 212.8 356.3 376.5 385.7 401.6 362.7 -144.9 -163.8 -181.8 -197.5 -149.9 214.7 212.0 207.8 204.5 n.a. 382.8 365.7 386.7 377.5 n.a. -168.1 -153.7 -179.0 -173.0 n.a. 1986 - J/F Months 1985 - Oct. Nov. Dec. 1986 - Jan. Feb. Source: U.S. Department of Commerce, Bureau of the Census. 

Federal Reserve (1986, March 31). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19860401_part1

@misc{wtfs_greenbook_19860401_part1,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1986},
  month = {Mar},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19860401_part1},
  note = {Retrieved via When the Fed Speaks corpus}
}