In an unprecedented statement last week, the chairman of the Federal Reserve system, G. William Miller, told an interviewer that he had no intention of tightening interest rates at this time.
What made this statement all the more incredible was that it was made just prior to the Federal Reserve Open Market Committee's monthly meeting which sets the Fed's policy for the coming month. In effect, the chairman's utterances meant that the decision not to tighten had been made prior to the actual meeting.
Almost as strange was Secretary of the Treasury W. Michael Blumenthal's speech in Dallas two weeks ago urging the Fed to tighten interest rates.
At last week unfolded, the first economic news release seemed to belie Chairman Miller's stance. But on Thursday, preliminary first-quarter data on the gross national product was released showing an increase of 0.7 percent.
Obviously, Miller had his eye on that figure when he was interviewed earlier in the week. Many thought GNP would be up 2 percent or more. So based on the strong showing of the fourth quarter of 1978, the economy has slowed, as the chairman stated.
Or has it slowed? From the last quarter of 1978, yes it has. But when one looks at the first-quarter GNP figures of 1978, we see that the economy declined 0.1 percent. The winter of '79 was more severe than '78, yet the current first-quarter figures show the economy up 0.7 percent. Obviously, the chairman hopes the economy has slowed and will continue to slow.
The fixed-income market reacted to these activities by improving dramatically. As was mentioned last week, the market was apprehensive as to the Fed's tightening, and yields rose. But once Miller's interview was released, the markets quickly moved forward. This was especially true in the short money market area, where rates declined 10 to 40 basis points in yield.
The new-issue market was fairly quiet last week. A BAA Georgia Power issue sold poorly while returning 11 percent.
On the municipal side, the South Caroline Power revenue issue term bonds were well placed, returning 6.875 percent.
Baltimore will market a $30 million general obligation issue Tuesdayat competitive bidding.
NEW YORK (AP)-Corporate bond and stock offerings planned for this week include:
Consumers Power Co., $100 million of bonds due 2009, rated A by Moody's and A-minus by Standard & Poor's.
General Motors Acceptance Corp., $200 million of debentures due 2003, and $100 million of notes due 1989. Both issues rate Aaa by Moody's and AA by Standard & Poor's. Morgan Stanley & Co. Inc.
Credithrift Financial Corp., $35 million of notes due 1989, rated A by Standard & Poor's; $15 million of subordinated notes due 1994, rated BBB by Standard & Poor's. Merrill Lynch, Pierce, Fenner & Smith Inc.
Gulf Power Co., $30 million of bonds due 1989, rated A by Moody's and A-plus by Standard & Poor's; 100,000 preferred shares, rated A by Moody's and A-minus by Standard & Poor's. Competitive bids.
United Bancorp of Arizona, $5 million of convertible debentures due 2004. Dean Witter Reynolds Inc.
Public Service Co. of Colorado, 2.5 million of bonds due 1986, rated AA. Dillion, Read & Co. Inc.
Southern Railway, $18 million of certificates due 1980-19948 rated Aa by Moody's and AA-plus by Standard & Poor's. Competitive bids.
Louisiana Power & Light Co., $45 million of bonds, rated Baa by Moody's and BBB-minus by Standard & Poor's. Competitive bids.
ONE DAY DURING WEEK
Republic of Texas Corp.,$75 million of notes due 2004. Salomon Brothers.
Simmons Industries Inc., $25 million certificates due 2004, rated Ba by Moody's and B by Standard & Poor's. Drexel Burnham Lambert Inc.
Golden Nugget Inc., 750,000 common shares. Drexel Burnham Lambert Inc.
Vishay Intertechnology Inc., 600,000 common shares. Drexel Burnham Lambert Inc.(TABLE) (COLUMN)Week of 4/17(COLUMN)Week of 4/12 6 Mos. U.S. Treasury Bill (coupon eq. yield)(COLUMN)9.98%(COLUMN)10.24% 1 Yr. U.S. Treasury Bill (coupon eq. yield)(COLUMN)9.97%(COLUMN)10.17% 2 Yr. U.S. Treasury Note(COLUMN)9.75%(COLUMN)9.84% 9 Yr. U.S. Treasury Note 8% 8/15/86(COLUMN)9.18%(COLUMN)9.22% 30 Yr. U.S. Treasury Bond 8 3/4% 11/15/08(COLUMN)9.09%(COLUMN)9.08% New AA Long Public Utility Bonds(COLUMN)9.85%(COLUMN)9.92% Bond Buyer 20 Bond Index(COLUMN)6.30%(COLUMN)6.33% 30 Day Muni, Supply + Blue List Volume(COLUMN)$2.13 billion(COLUMN)1.86 billion 30 Day Corp. Bond Calendar(COLUMN)$1.30 billion(COLUMN)2.09 billion(END TABLE)