The Sun.
London, England, 1861-07-15 00:00:00

THE TRENTENARY BONDS.

The Constitutionnel replies at some length to the
objections brought forward by the Siecle against
the trentenary bonds. The following is a portion
of the reply :—" We have answered by anticipation
many of the arguments of the Siecle. The points at
issue are the competition which these bonds will
cause to the 3 per Cent. rente, and the superiority
of a perpetual loan over one repayable within a
determinate delay. In the special case which now
occupies our attention—the execution of extraor- I
dinary public works—we persist in thinking that
resources, also extraordinary, are the best of com-
binations. We are well aware that the issue of
perpetual rente presents an advantage of a parti-
cular kind over the issue of bonds; that is, to
allow of a speculation in which every one may
take part, and which consists in selling rente for
the account and purchasing the loan. That spe-
culation is not practicable with bonds which are
a security for investment, and which almost abso-
lutely escape the operations of pure speculation.
`But this is not an objection which can be opposed
to the State, and the Siecle itself certainly has not
thought of making use of it. There remains there-
fore to be considered the injury which can be
done to the perpetual rente by. bonds issued at
the net rate of 432 fr. 77c., a price corresponding,
after all profit has been deducted, to the 3 per
Cents. at 64fr. 91c. ; the Siecle states that it is
equivalent to the 3 per Cents. at 60fr. 05c., or
the 5 per Cents. at par. The error of the Siecle
is flagrant and absolute, and can only be ex-
plained by a carelessness which is deeply to be
regretted in such a matter. The author of the article
pretends that he has found this calculation in the
Temps; we have sought for it there, but in vain.
The letups admits with the Minister of Finance,
with us, and with the four rules of arithmetic, that
the rate of 432 f. 77c. for bonds, exactly corresponds
to the 3 per Cents. at 64f. 91c. Our contemporary
perhaps wished to take into account the premium
of reimbursement attributed to each bond, and which
is 67f. 23c., payable in 28 years. We must be
allowed to remind him of very simple and really
primitive ideas in financial matters. What does
this premium of reimbursement represent? Nothing
more than the surplus which the subscriber may
hope for on his capital if he placed it in rente,
and which it is just to give to him .in return
for a reimbursement at a fixed price. The
loans of the year 1855 were issued at about
64fr. or 65fr. ; and yet one year after the 3 per
Cents. had reached 72fr., and gave to the subscri-
bers a profit of 7fr. or Bfr., or the eighth part of
their capital. In 1859 the loan was issued below
601'r.; in four months after the price was at 70r r.,
and the subscribers gained iOfr. on the sixth of
their, capital. Thisis precisely what is represented
by the premium of 67fr. 23c. given to the treasury
bonds, and it may be, therefore, seen that they are
simply assimilated to the 3 per Cents., but with a
little less advantage, since the profit is limited,
which it is not for the perpetual rente. In reality,
the bonds reimburseable at 500 fr. represent the 3
per Cents., redeemable at the fixed price of 75fr. In
1859 the real rate of the loan was 58fr. 57c., and
the sinking fund, soon after re-established, led to re-
purchases by the State at the average price of 68f
or with a premium in favour of subscribers of 9f.
25c. for 3f. of rente, which is much more than that
granted to the trentenary bonds. We hope: that
these observations will calm the tardy excitement
of the Riede ."