The Washington herald., 1913-02-22
WHY BOND MARKETS ARE
DULL.

| Copyright. lsr3 by C. VI. Keys New York;
| One OF the biggest and strongest OF the
life insurance companies of the country
recently published an annual report, in
which it indicated that it had bought
during the past twelve months the fol-
lowing investments. all stated here in
\ round numbers:
City real estate mortgages. 81, 90 615
| Municipal bonds ..............--.. oVG1
Miscellaneous bonds .............. 3oo0oo
Railroad bonds .........-......-... 4No,OeJ
Foreign bonds NEUTRALITY-SUSPICIOUS.. SOO90Oo
Loans to policyho Iders. S.eoo,O0
| To the iayman there is nothing very
illuminating about that showing. AS A
matter of fact. however, 1t answers a
whole lot of Questions that have been
| bothering the minds OF even the small
| investors of The country for the past
| couple of years. In particular 1t fur
nishes a substantial part OF the answer
to the question which SO many people
| have asked Why our best class OF rail-
road ami municipal bonds have been so
dull and their prices have been SaSsinS
during the rast little while.
A few years ago practically all the
buying OF investments that was done by
this c,,npany. and by most of the Other
large companies of its class. was in rail-
road and municipal bonds. Here and
| there it would take large city mort
cages. but mostly on big properties and
| in such big pieces that they could be
handled easily and quickly.
Every time a Wall Street syndicate
wanted to build a skyscraper, or a ho-
tel. or something like that in some
one of the big cities, it would count
freely on getting mortgage money from
this large insurance company, but when
the ordinary citizen tried to figure on
mortgages in small amounts, he never
once thought of the big insurance COM
panies as the proper place to obtain his
mortgage. On the contrary. he knew
perfectly well that while this partic-
ular company was willing to buy up to
SIC. 10000 of some good railroad bond. it
would never think of buying the kind
Of MORTGAGES that he, the ordinary Cit
izen. could create
This particular company owned at the
time of the insurance investigation in
New York. a dozen blocks of individual
railroad bonds that were bigger than
the entire amount of all the railroad
bonds. that it bought in 1912. 1t owned
more than s1o.Oo000O Of a single rail-
road bonds which had been bought at
a time when these bonds were being
sold to the public by the bankers who
underworld them. 1t was a constant
buyer Of all the railroad underwritings
of one of the big banking hoNses.
Last year-and possibly the policy will
continue for some time to come-this
company has been buying mortgages al
most to the exclusion of the class Of
bonds in which it was such a famous
factor in years gone by. 1t has bought
nearly 80 of city mortgages for every
dollar that 1t invested in railroad bonds
and IL has put So into municipals for
every dollar into railroads.
When one reads in the papers and
elsewhere that the standard bond
market is dull and uninteresting, and
when there seems to be a lack Of real
buying, it will be easier to understand
this market comment, IL one keeps in
mind the fact that for the last little
while at least the great insurance COM
panies which in previous years were
buyers of railroad bonds and other
standard issues running into the scores
of millions every year. are occupying
themselves at the present time looking
into local mortgages, here, there. and
everywhere throughout the United
States, Canada and foreign countries.
The mere withdrawal of this single
factor In the bond market must be taken
to account, in a large measure, for the
dullness which ,has been noticed in the
bond business for some time past.
As matter OF fact, such a withdrawal
is not likely to be permanent. In the
case of this particular company. the rea-
son for the change is not very hard
to find. One discoverers that the aver
age yield on the mortgages which 1t |
bought was over 5l4 per cent: while the |
yield on the bonds was barely. ~ per |
cent That is a good enough reason |
This difference of about three-quarters (,
of one per cent on the S3s.o00.0c0 in
vested amounts to pretty nearly 500. 700 !
a year of additional revenue gained by |
the company. IL it has made this gain !
without any sacrifice of safety-and there |
is no reason to suppose that 1t has not /
1t Is a good bargain 1t is hardly to be .
supposed. however, that II will long con-
tinue to be possible to find the kind Of |
mortgages that It wants to buy that |
Will yield this high return; and. on :