Interest rates in all sectors of the fixed income markets and all administered interest rates closed 1978 considerably higher than

The main cause for these ascending rates, which show no sign of abating, can be found in inflation. This inflation has been caused by excessive money growth in the economu, and by the government continuing to run a large defecit in the fourth year of the economic recovery. In essence, this faulty monetary and Fiscal policy, along with a robust economy, caused the inflation fires to grow in our economy. This created a dollar crisis in the foreign exchange markets as foreigners dumped dollars that were being depreciated by inflation in the U.S. in favor of more stable currencies.

Finally on Nov. 1, in an unprecedented move, the administration acted on several fronts to shore up the declime of the dollar abroad and, hopefully, to reduce inflation here at home. These actions gave impetus to the continuing rise in rates. But as the year ends, the demand for credit remains strong, the economy is doing well and inflation is still high.

The greatest percentage charge in interest rates occurred in the one year and under money market instruments.The Federal Reserve uses the overnight federal funds rate to indicate the Jirection of their policy. The funds rate move dup more than 325 basis points during the year.

The commerical paper market burgeoned both in size and in interest rate change.

The certificate of deposit market experienced similar growth, especially as the rates moved higher.

The U.S. Treasury bill market, especially out to 90 days, had a technical imbalance caused by heavy foreign purchase that made bills "expensive" relative to the rest of the money market instruments.

The Treasury was faced with the awesome task of financing another large deficit in 1978. In all, they sold $32.8 billion of net new marketable Treasuries. Although they were constantly in the market place and rates were rising, the Treasury was able to sell their securities with relative ease.

The star performer of the debt markets this year was the tax-exempt market. A near-record volume of loans were sold, slightly over $44 billion, just shy of 1977's record of $45 billion.

In the process the percentage of revenue issues continued to grow. In 1969, 32 percent of the new issues were revenues, in 1974, 43 percent, and in 1978, 60 percent were revenues, the remainderk being general obligations.

Of all the markets, the corporate market was the least active in 1978. A lack of new issues and a scarcity of secondary merchandise created a dull market. The amount of new straight debt totaled around $22.5 billion, down from 1977's $27 billion.

What characterized this market was investors with cash waiting for the opportune time to buy and market was investors with cash waiting for the opportune time to buy and market traders constantly shorting in a treacherous market.