July 30, 1958 FOMC Minutes

FOMC minutes

A meeting of the Federal Open Market Committee was held on Wednesday, July 30, 1958, at 10:15 a.m. This was a telephone conference meeting and each individual was in Washington except as otherwise indicated in parentheses in the following list of those participating: PRESENT: Mr. Martin, Chairman Mr. Hayes, Vice Chairman (New York) Mr. Balderston Mr. Fulton (Cleveland) Mr. Irons (Dallas) Mr. Leach (Richmond) Mr. Mangels (San Francisco) Mr. Mills Mr. Robertson Mr. Vardaman Mr. Treiber, Alternate Member of the Federal Open Market Committee (New York) Mr. Riefler, Secretary Mr. Thurston, Assistant Secretary Mr. Solomon, Assistant General Counsel Mr. Thomas, Economist Mr. Young, Associate Economist Mr. Rouse, Manager, System Open Market Account (New York) Mr. Kenyon, Assistant Secretary, Board of Governors Mr. Koch, Associate Adviser, Division of Research and Statistics, Board of Governors Mr. Keir, Acting Chief, Government Finance Section, Division of Research and Statistics, Board of Governors Messrs. Coombs and Marsh, Assistant Vice Presidents, Federal Reserve Bank of New York (New York) Mr. Stone, Manager, Securities Department, Federal Reserve Bank of New York (New York) Mr. Marsh reported that this morning there had been a little in prices of the longer-term Government securities, a further gain

movement which carried over from yesterday. This could be regarded as a technical rally, since the yields on Government securities had gotten somewhat out of line with those on corporate obligations. To put it another way, the market had overdone it a little bit. The technical situation in the market had helped to bring about a little firmer tone, with some short covering. The market appeared to feel quite strongly that this was a technical rally and did not expect it to hold for any length of time. It was known in the market that there were certain holders--speculative holders in particular-who would like to sell if they had a chance. Mr. Marsh said that yesterday there were practically no buyers in the market until late afternoon, when a few buyers ap peared. There was no optimism at present about a lot of buyers appearing, and the people in the market just could not envisage institutional investors becoming heavy buyers. Mr. Marsh went on to say that some of the medium-term issues were a couple of thirty-seconds higher. Yesterday there was some banks that wanted to swap, and today there selling in that area by Among other issues, the 2-5/8s of 1965 was a technical reaction. bit. The Treasury's new 3-1/2s of 1990 were up a little and the quoted to yield about 1.69 per 1-5/8 per cent certificates were certificates were per cent tax anticipation cent and the new 1-1/2 create the losses that some par, but not enough to quoted below

thought there would be in those securities. Subscriptions appeared to be largely from the city banks and to be very light from country banks. However, while the total of subscriptions countrywise was still not known, there was no doubt about the issue being covered. The only doubt was how much the subscriptions would exceed $3.5 billion. From indications yesterday, it appeared that the allot ment could go as high as 75 per cent, which might be quite a shock to the market and could cause a reaction throughout the list. Mr. Marsh reported that the money market was easy. Net free reserves yesterday amounted to $625 million, and the estimate of average free reserves for the week ending today was about $550 million. For the following statement week the estimate was $1,037 million. The Management of the System Account, Mr. Marsh said, was going to give serious consideration to selling some Treasury bills today. The bill market showed a firm tone and dealers had very light bill positions. Already there had been one bid for bills, and it might be a good opportunity to sell. It had not been decided of bills would be made on a go-around of the market. whether the sale of a shock to the market, but some bills That might be something probably could be sold without much disturbance. In further comments, had not seen any demand for certificates Mr. Marsh said that the Desk the System to mop up excess the market was rather expecting and that

reserves. The market had been waiting to see what was going to come out of the Treasury's cash offering and would make up its mind after that. Mr. Marsh did not think that the Treasury could be at all sure of the results until tomorrow. Comments indicated that the members of the Committee were favorable to the proposed sale of bills. However, Mr. Mills inquired whether the Desk had considered that the sale of bills might possibly be disturbing when related to an article in this morning's New York Times which proclaimed a return on the part of the System to the policy and withdrawal of the System from any other "bills only" operations in the market. there seemed to have been no mention Mr. Marsh replied that not believe that there market, and he did the article around the of was fully aware that The market, he said, apt to be any reaction. was be, and the would not market and probably not in the System was the to a been discounted had Account probably from the of bills selling extent by the market. large Fulton, and Mangels by Messrs. Irons, Following comments to the new districts their respective in subscriptions regarding would be that there it was stated certificates, tax anticipation l1:00 a.m. at tomorrow the Committee of meeting telephone another then adjourned. The meeting