46 Fed. Res. Bull. 1 (1960)

handle is hein.journals/fedred46 and id is 1 raw text is: DEMANDS FOR CREDIT AND CAPITAL were
large throughout 1959. In addition to rec-
ord peaceti ne borowing by the Federal
Government, private financing reached a
new peak, one- 44d above 1958 and one-
tenth above ta previous peak in 1955.
Increases in borrowing last year were pri-
marily in short- and intermediate-term debt.
Consumer financing of durable goods pur-
chases and business borrowing for working
capital needs rose sharply. Moreover, Fed-
eral Government borrowing was almost en-
tirely through short- and intermediate-term
issues, as the statutory ceiling on interest
rates on new Treasury bond issues prevented
the Government from competing effectively
for long-term funds. Federal bond financ-
ing in 1959 was only one-seventh as large
as in 1958.
Private long-term financing increased
only slightly. A rise in mortgage bor-
rowing was largely offset by a decline in
security financing by domestic corporations
and foreign borrowers. Also, expansion in
State and local government debt was some-
what smaller than the record growth in the
preceding year.
Interest rates rose further in 1959, reach-
ing new postwar highs. Sharpest increases
were in short-term rates, reflecting the ex-
ceptionally large demands for short-term
credit. Despite contraction in total long-
term financing, bond and mortgage yields
also advanced.
The increase in long-term borrowing
costs reflected in part a decline in the flow
of savings to institutions that customarily

No=.-Flow of fundi data; for description see But.cnw
for August 1959, p. 928 ft. Estimate, for 1959 preUminary.
ank loans n.e.c. are mainly loans to businers. Federal obli-
gations include nonguaranteed debt of Governnent-.ponooied
enterrises. Corporate securities include Isues of forein cor-
pora.ns, international institutions, and foreign ~overnesest
solto te United States as well as issues of domnestic cor-
supply the bulk of long-term funds to capital
markets. Growth in time and savings de-
posits at compercial and mutual savings
banks was much smaller last year than in
1958. The decline in savings flows to banks
more than offset the rise in flows tQ savings
and loan associations and pension funds;
saving through life insurance companies
was little changed. Expansion in short-
term lending and tighter reserve positions
also limited the supply of commercial bank
funds available for longer term investment.
Rising interest rates, however, attracted
an increased volume of consumer and busi-

Capital Markets in 19 59



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