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X-3236

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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X-3236

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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li s

- 3 - x-3236

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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- -

89

x-3236

#

•

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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G

. 5 .

T-3236

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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~ 6 -

X-3236

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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1 1 9 0

- 7 -

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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* >

— —

• 33

X-5336

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 / ^

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