Money Supply Up $1.2 Billion in Week

The nation’s basic money supply rose $1.2 billion in mid-March, the Federal Reserve Board reported Thursday.

The rise was slightly less than market-watchers had expected, but the report had little effect in the credit markets.

The Fed said M1 rose to a seasonally adjusted $740.2 billion in the week ended March 16 from a revised $739 billion the previous week. M1 includes cash in circulation, deposits in checking accounts and non-bank travelers checks.

For the latest 13 weeks, M1 averaged $737.3 billion, a 16.7% seasonally adjusted annual rate of gain from the previous 13 weeks.

Last year, the Fed, in its attempt to provide enough money to stimulate non-inflationary economic growth, said it would like to see M1 grow in a range of 3% to 8% from the fourth quarter of 1985 through the final quarter of 1986.

Last month, Fed Chairman Paul A. Volcker said it downgraded its view of M1’s significance in light of the index’s “erratic behavior.”

William Gross, head of fixed-income for Pacific Investment Management of Newport Beach, said the $1.2-billion rise in money supply was “certainly around expectations.”

“These days, unless there is substantial deviation from the norm, the money-supply figure tends to have little bond market effect--and that certainly was the case today (Thursday),” he said.

Bond prices were slightly higher before the money-market report, and remained so after the report came out. But analysts attributed the bond market’s performance to the day’s auction of seven-year Treasury bills.

Yields on the notes fell to the lowest level in more than a decade.

The average yield was 7.04%, down slightly from 7.09% at the last auction on Dec. 30.

It was the lowest rate since seven-year notes averaged 7.02% on Nov. 4, 1976. The notes will carry a coupon interest rate of 7%, with each $10,000 in face value selling for $9,977.20.

“They traded aggressively,” said William Brachfeld, executive vice president for fixed income group at Daiwa Securities America. “A lot of people bought them, own them, and are betting the market does better.

“Whether it does do better--we’ll have to wait and see,” he said.

In other reports:

- The Federal Reserve Bank of New York reported commercial and industrial loans at major New York City banks fell $222 million in the week ended March 18, compared to a decline of $572 million a week earlier.

- The Federal Reserve said discount window borrowings from the Federal Reserve System averaged $302 million a day in the week ended March 25, up $79 million from the previous week.

- The Federal Reserve Bank of St. Louis reported that the monetary base, the seasonally adjusted total of member bank reserves held at Federal Reserve banks and cash in bank vaults and in circulation, was $260.1 billion in the two-week period ended Wednesday, down from $261 billion two weeks earlier.