FEDERAL RESERVE BANK OF NEW YORK 71 outlays in 1964 that is larger in both absolute and percent- of spending for the first quarter of this year, but this revision age terms than any of the actual annual gains since the still implies little change over the fourth-quarter level. advance recorded in the investment boom year of 1956. Plans for the second quarter of 1964 call for an increasein A special McGraw-Hill survey taken in January already outlaysof nearly $1.5 billion, or 3½ per cent over the first had confirmedthat spending plans had been revised upward quarter; and, if the projected full-year total is to be reached, substantially sincc first reportedlast fall, and these findings outlays in the second half of 1964 will have to climb about are now reinforced by the 10 per cent rise shown in the 6 per cent above the first-half average. The record of this Government survey. survey in previous years suggests that plans reported at the Actual spending in the fourth quarter of 1963 turned beginning of the year are in large part carried out—indeed out to be somewhat higher than had been indicated in the bettered in years of busincss expansion. The understate- Government's survey taken last November (See Chart II). ment in the February survey was, however, rather small for A similar upward revision is evident in the estimated level 1962 and 1963. The Money Market in March The money market remained generally firm in March, foreign countries. The same sentiment was evident in the handling smoothly the large flows of funds associated with corporate and tax-exempt bondmarkets, and prices in these the quarterly corporate tax and dividend payment dates markets also moved downward during the period. and the impending April 1 Cook County, Illinois, per- After the close of business on Thursday, March26, the sonal property tax date. Although the reserve positions of Treasury announced the terms of a new cash borrowing banks in the leading money centers came under moderate operation. An additional $1 billion of the outstanding pressures at times during the month, these banks were able 3% per cent notes due August 13, 1965 was offered at to satisfy a large part of their reserve needs in the Federal a price of 99.70 to yield approximately 4.10 per cent. funds market—where a 3½ per cent effective rate gen- Subscriptions were received only on Tuesday, March 31, erally prevailed—and member bank borrowings from the with payment due April 8. Payments may he made through Fcdcrat Reservc Banks declined slightly over the period credit to Treasury Tax and Loan Accounts. (At the same as a whole. Rates posted by thc major New York City time the Treasury announced another in the series of one- banks on new and renewal call loans to Government se- year bills—Si billion of bills maturing March 31, 1965, to curities dealers were mainly in a 3¾ to 4 per cent range. be auctioned April 3 for payment April 8, with commercial Offering rates for new time certificates of deposit issued banks pcrmittcd to pay for 50 per cent of theirpurchases by the leading New York City banks moved slightly higher through creditingTax and Loan Accounts.) in March, as did the range of rates at which such certif- After the close of business on April 2, the Treasury an- icates were offered in the secondary market. Rates on nounced that early reports indicated subscriptions for the some maturities of directly placed finance company paper reopened V/s per cent notes of approximately $10.2 bil- also rose moderatelyover the month as a whole. lion. The Treasury will allot in full subscriptionsof $50,000 In the Treasury bill market, demand expanded in or less. Larger subscriptions will be subject to a 9 per March and bill rates receded somewhat from the levels to cent allotment (with a minimum of $50,000). which they had risen in late February in the wake of the British bank rate increase. Prices of Treasury notes and flANK RESERVEB bonds, on the other hand, declined during most of the month, reflecting market expectations that interest rates The month was characterized by sizable week-to-week would trend upward during the remainder of the year if movements in aggregate free reserve levels. These reserve onomic expansion continued and rates moved higher in fluctuations were not accompanied by any similar swingsin 72 MONTHLYREVIEW. APIUL 1964 money market conditions, however, as their effects were Market factors absorbed excess reserves on balance largely offset by movemcnts in the distribution of reserves from the last statement period in February through the as between "city" and "country" banks. At the beginning of final statement week in March. Reserve drains arose the month, money market banks made extensive prepara- primarily from an increase in currency outside the banking tions for anticipated mid-March seasonal reserve pressures. system' and from a rise in required reserves which partly Typically, such pressures arise as a result of expanded reflected loan expansion over the quarterly corporate tax bank loans to corporations, nonbank financial institutions, and dividend dates. An expansion in float partly offset these and Goverment securities dealers over the quarterly tax drains. System open market operations supplied reserves and dividend dates. Accordingly, in early March, banks in over the period as a whole, offsetting reserves absorbed by the money centers increased their offering rates on time market factors. System outright holdings of Government se- certificatesof deposit in order to minimize net time deposit curities rose on average by $55 I million from the last state- withdrawals around the tax and dividend dates. In addi- ment period in February through the final statcmcnt week tion, these banks relied more heavily than usual on the sale in March; System holdings of Government securities un- of bankers' acceptances and of intermediate-term Govern- der repurchase agreements averaged $83 million in the ment securities to acquire reserves. These transactions, final statement period of the month, whereas none bad together with an ample supply of Federal funds during been outstanding in the last week of February. From Wed- much of the period, facilitated smooth midmonth adjust- nesday, February 26, through Wednesday,March 25, Sys- ments on the part of the banking system. tern holdings of Government securities maturing in less than one year rose by $429 million, and holdings matur- ing in more than one year increased by S22 million. CHANGES D4 FACTOBS TENDINGTO IN(EA5E OR DECREASE THE GOVERNMENT SECURITIES MARKET MEMBER BANK RESERVES. MARCH 1964 In millions of doUsli; (-4-) denotca inctcasc, In the marketfor Treasury notes and bonds, an ixnpor- (—I dcieaee in excess rcservca tarn background factor during much of the month was a that economic Deil aecize,—vifl enOod persistent feeling continuing expansion Nit home and tendencies toward interest rates abroad r.ctoo changi, at higher Mn,. Mu. Mar. Mar. be an trend in domestic in- 4 U 18 25 might accompanied by upward tcrc.st rates. In the early part of the month, increased offer- trainsetionl from Operatini — ings—particularly of intermediate-term securities 1',oury Opr4IA.1C4.8' — 58 + (9 .4.. 45 — 1*1 Itnarve float — 300 + 0(3 + 148 +2*3 + *S commercial banks—encountered little demand from either Currq,ry In clrculetico — 37 — 193 — 184 + 33 — 314 (bId end (ozcIi $000W(t — + + 5 — *4 — 13 investor or sources, and of intermediate- Otbrr ,1ciooIte. etc. + 1 — 22 ÷ 44 + *9 .4. IC'3 professional prices and issues declined. The Tocal — 414 — 14 + LU + *312 —334 long-term Treasury generally market firmed to Direct f.d,rsl Roeneec oradfl tranloetloas atmosphere slightly prior midmonth, O,,vnnsrnrmt accu.fltIe,: — 1f2 1314 331 as participants began to feel that no immediate tighten- mmd inozhrt purobaem0 op o*Ioa + 4U .4. 192 + + IIrld IaOIlOa N3)ILTCbRBO Ioeiit3... — + 3 + 8 + S in was Commercial bank LMaO0. dl300untI. and .4vence.: ing monetary policy likely. — YE' Mecibev bsnk b,rowIneu + 102 — *01' + 1(13 + 9 modest investor demand (hker offerings contracted, a emerged, I31,u,knzV enlrna3tenrr,: and some short took After 1(31041.1 oulxlgtit 2 1 — 2 + 1 4. 2 professional covering place. + + .1. 18 51 Under PBPUPC1.8R, bgTrenenta . 0 ÷ *( 11 + + midmonth, confidence in the stability of current interest futa1 + 313(0 ÷ 1(11 94 4. 55 + ?0O rate levels weakened once again amid further indications of iIeber Dank ,ecnrvea business and in to the rise in stock Wilt. Foderel R4ew7re *231 ; ss 3*? + expansion response - + + + — Cant. &Uo,,,nl ec reBorloet — 73 — 213 + 114 -4- market averages to record heights. Offeringsexpanded, and T000l r.nor,nnt 4 147 — 203 + 120 +3031 + 41.4 of issues fell further. In the final few of Citect of cOsuiSo Iii rsijir.d ruecwsnt.... — lii + 3* — 117 —101 — 317 prices coupon days the a steadier Someinvestor Exous, reserves? + 151 — 114 + *9 + 146 + ler month, atmosphere re-emerged. demand and dealer short covering developed, and in this DaiI awaOu 14,01 of Bo.krbunk: of additional 37/s cent Jlorro.tng, fran Renecre floob $81 33 i.5 I7tI 118* setting the Treasury's offering per Kzu vmerreot 490 3*4 211 520 4351 notes attracted interest. de- Floe eGmeil US 03 1? 141 113* good Nonetheless,reflecting clines earlier in the period, prices of notes and bonds at the So'e: Because 0? ruaisdlai. Spurn., rio not 000eBoe.rlIj add to (otale. • IfldiUdBo obinve, In l'reosury curreccy end ouoh. f Tbrec flgSifee are ecthn5$ed. 2 A,eceenfat four wouka dod March 25. 1944. '"Currency in circulation"less "cash allowedas reserves". FEDERAL RERERVE BANK OF NEW YORK end of March were generally unchanged to '94 below late OT$4tR SCURITIE5MARflTS February levels.