frsbog_mim_v15_1186.pdf
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F E D E R A L R E S E R V E B O A R D
STATEMENT
FOR TEE
PRESS
F o r r e l e a s e i n af te r noon papers ,
Wednesday, November 2 , 1921 .
CONDITION OF THE ACCEPTANCE MARKET
The fo ll ow in g re po rt s have been rec ei ved from t h e Federa l R e -
serve Banks concerning t h e condi t ion of t he acceptance market i n
t h e i r r e s p e c t i v e D i s t r i c t s :
DISTRICT
NO. 1
(BOSTON)
The r a t e ba s i s a t which Bankers ' Acceptances s e l l re f l e c t s a
f u r t h e r s o f t e n i n g of t h e market, t h e r u l i n g r a t e f o r prime 90-day
unendorsed acceptances no w be ing 4 ^ p e r cen t . Act ive demand h a s
sprung
u p f o r
t h i s c l a s s
of
paper, corporations'
1
wi th i d l e money,
owing t o bus iness s tagn a t ion , b e ing la rg e byers . F o r such, bank-
e r s ' acceptances of fe r an ex ce l l en t form o f l iquid investment
pending bus ine ss re v iv a l .
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g
DISTRICT
NO. 2 (NEW
YORK)
Dea le r s ' bid r a t e s f o r priire b i l l s were lowered l / 4 o f o n e
p e r
cent
t o 4 5 / 8 p e r
cent ear ly
i n
October r e f l ec t ing eas i e r
t e n -
dencies i n money markets, increased investment demand and moderate
supply. Dealers
1
sel l ing rates were lowered i n propor t ion and prime
b i l l s f r o m 30 t o 120 days maturity sold a t 4 l / 2 p e r cent during t h e
l a s t t hre e weeks o f October, a s compared with 4 3 / 4 p e r cent a month
a g o .
Pruchases b y interior banks were somewhat restricted because of
t h e lower rate b u t s a l e s t o these banks a n d f o r foreign account c o n -
t inued
t o
c o n s t i t u t e
a
subs tan t i a l por t ion
of
t ot al sa le s. Large
New York banks purch ase d f a i r amounts of b i l l s g iv ing p re fe rence i n
some cases
t o t h e
shor t e r ma tur i t i e s .
B i l l s drawn ag ai ns t export shipments of co t ton and grain were,
a s last month, t h e most numerous of the new offer ings , wi th cot ton
b i l l s incr eas in g s l ig ht ly dur ing October. B i l l s cover ing impor ts
of raw sugar mainly of 30 to 60 day maturi ty, were next i n import-
ance, an d because o f t h e early maturity were i n good demand. De al er s
re po rt ed somewhat l a r g e r supply of bi l l s drawn f o r t h e purpose o f
fu rn is hi ng do ll ar exchange.
The
number
of
inves to r s
i n
b i l l s con tinued
t o
expand.
Two
d e a l e r s who maintained reco rds of new names added t o t h e i r l i s t s of
acceptance buyers reported 24 addi t ional purchasers wi th in a period
o f three weeks.
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DISTRICT
NO. 3
(PHILADELPHIA)
fi
further easing
in the
selling rates
of
bankers
1
acceptances
has
been
noted during the past month, and rates novv average l /4 p e r cent lower. Rates
on prime bills of member banks are 4g per cent f o r maturities up to 90 days,
and 4-5/8 per cent for ISO days. Non members
1
bills as a rule are l /4 per
cent above these rates. The general improvement in monetary conditions i s
said to be mainly responsible f o r this change. One dealer makes the follow-
in g comment: The lowering of the discount rate by several of the Federal
Reserve Banks has confirmed the tendency toward lower rates f o r acceptances
in the open market rather than served as a factor in causing such decline.
The decline in rates has been brought about primarily by the easing money
situation and the decreased supply of bi l l s . Other letters lend support
to this view, and i t i s further stated that th e security market has not been
sufficiently active
to
absorb
the
large amounts
of
money that have been loan-
able
on
call.
The issues of United States certificates of indebtedness combining a
slightly higher yield with the unquestioned security of the Government have
tended to restrict sales of acceptances, but judging by the enormous oversub-
scriptions to such is sues , they have evidently not absorbed the entire avail-
able supply
of
short-term investment funds. Bankers' acceptances
are
finding
a ready market; in fact, dealers state that they are not available in suff ici-
ent
amounts
to
satisfy
the
demand. Sales
by
four dealers
in
this District
during September were
16 per
cent below those
of
.August. City banks
are the
principal purchasers.
A
large amount
of
buying
fo r
foreign account
i s
also
reported,
and
this
i s
being handled through private banking houses
and the
Federal Reserve Bank
of New
York.
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#
•
The f i n a n c i n g of fo re ign t rade i s r e sp o n s ib l e f o r t h e h u l k o f t h e a c -
ceptances executed la te ly , h u t n o a u t h o r i t a t i v e d a t a a r e y e t a v a i l a b l e r e -
garding
t h e
d i s t r i b u t i o n
of
these r ins t ruments over
t h e
v a r io u s c l a s se s
of
t r a n s a c t i o n s
-
foreign t rade, dol lar exchange, warehousing,
and
domestic
shipments# I t i s st at ed , however, th at warehousing b i l l s have remained pra c-
t ica l ly unchanged i n volume. Cott on, gr ai n, tobacco and sugar b i l l s have
>
formed a l a rg e p a r t of recent t ransact ions covered b y accep tances .
Reports from twelve member banks i n this Federal Reserve District show
a decrease i n t h e volume of acceptances executed during t h e month ending Oc-
tober 1 0 , b u t a considerable gain i n t h e amount outstanding over that of the
preceding month:
Executed dur in g Outs tandi ng on
•preceding month da te giv en
1921 - March 10 $5,325,000 $14,12 7,000
.April 10 4,558,000 13,234, 000
May 10 5,611,000 12,892, 000
June
10
2,795, 000 10,798,000
J u l y
10
3,121,000 9,28 6,0 00
August 1 0 4,852,00 0 8,7 56,0 00
September
10
5,312,000 9,009 ,000
October 10 4,507,000 9,902 ,000
DISTRICT TfQ« 4 (CLEVELAND)
Of twenty re po rt in g acc ept ing banks, seven in di ca te acc eptan ces executed
f o r customers during September, $2,865,122, and el even banks re por t acceptance s
paid during t h e same:per iod , $3*561,964. P redomina t ing c l as s i f ic a t i on s a r e
c o a l , o i l , a n d t r a c t o r s f o r domest ic shipment* Bank ers
1
acceptances bought b y
t h e Federal Reserve Bank of Cleveland during September, 1 9 2 1 , amount t o
$3,168,127, and the amount paid t o $2,808,507«
The acceptance market w as inact ive throughout t h e month. B i l l s were
sc a rc e , a n d t h e r a t e s s t e a d i ly d e c l in e d t o th e i r p r e se n t l e v e l of 4g p e r cent*
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This
w as
p a r t l y
d u e t o t h e
s c a r c i t y
of
b i l l s
a n d t o t h e
lower level
of
ca l l
money rates
in New
York. In di ca tio ns through th is cr ed it i nstrume nt show
a
gener a l l i qu i da t i on of f roz en cr ed it s with domestic shipments being sold i n
11
spot and otherwise being taken care of through t h e channels of s t r a ight loan
Few b i l l s or ig ina ted again s t domest ic shipments and on warehouse receipts
T he
ma j o r i t y
of
b i l l s , accepted
b y t h e
banks
i n t h e
D i s t r i c t , were p a r t i c i -
p a t i o n s
of o ld
syndica tes
and a few
b i l l s aga i ns t f o r e i gn t r ans ac t i ons
*
The
demand throughout
t h e
month
h a s
remained prac t i ca l ly
t h e
same
a s in
t h e
previous month.
I n t h e
f i r s t week
o r s o ,
when
t h e
ra te s f i r s t began
t o
f a l l , t h e r e
was
a
m o i
55
n
tarv
but as th e
month progressed
a n d
idle funds
accumulated,
t h e
c a l l
f o r
b i l l s became strong*
As th e
market could
n o t
supply
t h e
need
f o r
pr ime b i l l s , temporar i ly idl e funds were div er t ed in to other
channels .
The
r a t e s
f o r
p r i me e l i g i b l e b i l l s
a r e a s
fo l lows :
Under 3 0 days 4 il t o 41 p e r cent
30 to 60 days 4 i t o 4 § p e r cent
60 to 90 days 4 i t o 4% p e r cent
di s t r i c t
#0. 6
(atlawt.a)
Reports from accepting member banks
i n t h e
D i s t r i c t r e f l e c t l i t t l e a c t i v -
i t y i n
acce ptanc e market co nd it io ns . Most
o f t h e
banks repor t
n o
deal ings
i n
acceptances
* A few of the
re po rt s show domesti c acc ept anc es execute d dur ing
September
t o b e
somewhat larger than during August, while foreign acceptances
executed during September were, i n t h e aggregate, about three t i roes t h e amount
dur ing
t h e
preceding month.
Acceptances purchased i n t h e open market b y t h e Federal Reserve Bank
during September> however, were approximately
577 P
e r
c e n t
la rg er than dur ing
August,
and in
turn were larger than
f o r a n y
month since February
1920-
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DISTRICT NO. 7 (CHICAGO)
Rev ised s t a t i s t i c s , comri led
s o
that banks
d o n o t
inc lude
i n
purchases
b i l l s which they themselves have acce pted ,
n<r
purchases
and
s a l e s
o f
b i l l s
f o r account of s pe c i f i c cus tomsrs , a r e a s fo l lows:
( I n
Thousands
of
Dol la rs )
Twent y-nine bank s September August Ju l y
B i l l s bought 7,8 58 8,685 11,847
Bi l l s so ld . . 16,525 23, 763 24 ,5 71
Held
a t
c lo se
of
month
. . . .
6,728 5»77^
Amoun t accep t ed . . - .
. . . . . 11,800 20,72 9 22, 651
Included
i n t h e
s t a t i s t i c s
a r e
these
of -one
bank which does
a
large
brokerage business i n bankers ' acceptances .
These re po rt s from banks
i n t h e
Seventh Federal Reserve District show
a
continued decrease since July
1 , i n
b i l l s accep ted , bought
and
s o l d .
The
only
item t o show increase i s b i l l s h e l d a t t h e c lo se o f t h e month.
DISTRICT
NO. g (S T .
LOUIS)
During
t h e
pas t th i r ty days
t h e
acceptance market
h a s
been considerably
more active than f o r some time previous- The larger banks o f t h e D i s t r i c t
have d i sp layed more in te res t , inves t ing ra ther f ree ly
and
r a t e s
of
discount
have de cl in ed . Prime unendorsed b i l l s a r e now s e l l i n g a t about 4 ^ p e r cent ,
which
i s t h e
lowest quotat ion
f o r
many months.
DISTRICT NO. 9 (MIMMPOTIS)
During
t h e
month
of
September more tha n $169,OCX) worth
o f
trade accept-
ances were discounted
b y t h e
Minneapolis Fe de ra l Reserve Bank;« This
i s i n
c o n t r a s t w i t h
t h e
t o t a l
of
$329,000
i n
trade acceptances discounted during
•
t h e
month
of
Augus t. Las t y e a r between .August
and
September, there
w as
also
a
d e c l i n e
i n t h e
amount
of
tr ade acceptances disc ount ed from $289,000
t o
$166,000-
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7s.-y.jjG
During September, th i s bank dis cou nte d more than $10,00 0 wort h of bank-
e r s ' acc ept anc es . September w a s t h e f i r s t month s ince June i n which this
Bank discounted any bankers ' acceptances dur ing 1 9 2 1 .
There were n o purchases durinp September of ban ker s ' acceptances , t r ade
acceptances , o r dollar exchange.- The r a t e s f o r t h e di sc mint a n d purchase of
acceptances remained unchanged during September.
DISTRICT
WO* 10
(KANSAS CITY)
During t h e p a s t 10 to 60 d&y$ t h e acceptance market i n t h i s D i s t r i c t h a s been
q u i e t , d u e l a r g e l y t o t h e d e c l i n e i n f o r e i g n t r s i e a c t i v i t y * The Fede r a l R e-
serve Bank i s carrying something over $1,000,000 of bank acceptances based
on
Oklahoma cotton,
b u t a t
th i s da te
i n
October
i s
c a r r y i n g p r a c t i c a l l y
n o
acceptances based on wheat and f l o u r f o r expor t -
DISTRICT NO. 11 (DIT.TJR1
I nqu i r i e s d i r ec t ed
t o
accepting banks develop
t h e
f ac t t ha t t he r e
was a.
s u b s t a n t i a l i n c r e a s e i n September of outs tanding acceptances created i n t h i s
D i s t r i c t ,
t h e
t o t a l
on
September 30th bei ng $2,48 6,000 . which re pr es en ts
a n i nc r eas e of $1,53 0,0 00 si nc e August 31s t* Most of these acceptances were
based on domestic shipments and s torage of goods.
DISTRICT NO. 12 (SAN FRANCISCO)
The notewor thy fea ture o f t h e s a n Francisco b i l l market dur ing t h e month
ending October 1 0 t h w a s t h e s teady dec l ine i n ra te s- From 5$> a t which f i gu re
i t h a d remained f o r over a month, t h e r a t e f e l l s u c c e s s i v e l y t o 4-7/8 $, 4-3 /4$
4 - 5 / 8$ , and f i n a l l y 4 - 1 / 2 $ on October 1 1 t h . This dec l i ne i s a t t r i b u t e d t o t h e
pronounced easing o f t h e call money a n d b i l l r a t e s i n t h e E a s t . I n s p i t e of
%
th i s d iminut ion
of
r e t u r n
on
acceptances, demand
i s
repor ted
t o
have been f a i r -
l y well maintained throughout t h e month . Nor thern Ca l i fo rn ia a n d t h e P a c i f i c
Northwest continue t o accept over 90$ of t he b i l l s dr awn i n t h i s D i s t r i c t , and
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t o b u y 8 0 # o f a l l acceptances sold he re . B i l ls of 12 0 and 150 da y matur i t i es
have become more popular, doubtless
due t o
a n t i c i p a t i o n
of
f u r t h e r r a t e
d e -
c l i n e s
i n t h e
immediate f u tu re . Matur i t ies
of
bi l ls purchased dur ing
t h e
month ending October
1 1 t h
were divided roughly
a s
fo l lows:
30 day - 26.0#
60 day -
25-0#
90 d a y - *42 *5#
120 day - 6 .0 #
150 da y - 0 . 5#
Bi l l s o r i g ina t i ng
i n
t h i s D i s t r i c t
a r e
s t i l l somewhat la rg er
i n
total amount than they were during t h e summer months, doubtless d u e t o c o n -
t i n u a t i o n
of
crop marketing.
The
thi r ty -se ven pr in ci pa l accept ing banks
of the
D i s t r i c t report ed to t a l September purchases
of
acceptances
of $5
»99^»OCO
compared with $2,996,000 i n August* Of th e $5»99000 purchased, $2,118,000
represented bi l l s drawn i n this District , based primarily upon canned goods,
wheat, sugar,
and
co ff ee . These thi r ty -se ven banks report ed a t o t a l
of
$11,480,000 acceptances held
a t t h e
c lose
of
September compared with $4,075,000
on hand a t the end of August.
Rates i n t h e open discount market a t the end of the period were a s
fol lows:
30
days
60
days
9 0
days
E l i g i b l e member bank s 4-1/2 # 4-1 /2# 4-1 /2#
E l ig ib l e non-members 4-3/4# 4-3/ ^# 4 - 3 / ^