New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1915-06-28
WEEK in FINANCE
HERE AND ABROAD
British Loan Recognizes
Higher Cost of Funds
for Wars Needs.
BANKS HERE AID
FRENCH CREDIT
No Great Amount of Selling
Here Because of England's
New Borrowing.

While our market halted and securi-
ties fell little lower IN reduced trad
/ ing last week, there were made known
/ two important developments in Euro
pean finance. Great Britain announced
! the terms Of It's new war loan of 4ie
per cent bonds up 70 81 900 600, 900, and
in behalf Of the French government the
Rothschilds Of Paris arranged a de-
post Of our railroad bonds here as col
/ lateral for bank loans TO aid in pay
ment for war supplies. The British
/ issue affects our market only in
/ directly. though It is understood that
| the new securities will form basis Of
some accommodation by banking IN
stitutions here. So, with this French
| loan. we offer aid 20 our customers
across the seas through bank credits.
drawing on the great supply created
through our ever mounting surplus Of
idle reserve.
The British war loan gave evidence
rather more spectacularly than had
been expected Of the advance in in
terest rates from wars demands pre-
dicted last summer. A year ago con-
soils, long the worlds premier security,
were selling around rs. A perpetual
debt bearing 2l4 per cent interest, the.f
yield 10 the purchaser was 8 l-3 per
cent. The first war loan. put out in
November, was q thirteen-yesr II per
cent issue at e5. the borrowing being
on a per cent basis. Now these two
British obligations may be converted.
the first war loan at 90 and consols at
&c 2-S, into the present loan of an per
cent bonds offered at par and redeem
able between 1925 and 1916. The war
is now in its eleventh month. and the
immense expenditures Of the British
nation have changed its credit basis
from 3 1-3 to Al per cent.
When, in our Civil War, we had been
engaged in hostilities for about the
same length of time our government
bonds were selling to yield about Ga
per cent, where before trouble seemed
imminent per cent bonds had sold at
par or better. But, in addition, gold
was at a premium here, one dollar in
currency bringing only about 96'a
cents in gold. Before the war had
ended the monthly average quotation
for gold in this city had shown cur
rency worth less than 80 cents on the
dollar. Our supply of the precious
metal had been inadequate, and our
financing, as seen now, was unwise.
Great Britaln's Gold Basis.
Great Britain's Treasury authorities
may be expected TO maintain their
country on a gold basis if possible.
Though exchange rates here have
turned against them and are still abb
normally low, even after last weeks re-
coverJ, notes are still redeemable in
gold at the Bank of England and par
ity between paper and gold is main
tanned. With purchases of supplies
here at the current rate and the war
prolonged for years, the problem will
be a difficult one. British goods can
apparently not be sent out to meet the
balance due US, and securities have not
moved to this side of the Atlantic in
sufficient volume to make gold ship
ments unnecessary. If the Allies-for
London is financing the Allies pur-
chases-were to pay in gold, not even
working the mines in South Africa,
Australia and Russia at capacity could
add sufficiently TO the accumulations OF
gold to meet debts here and keep Great
Britain on q gold basis.
To what extent securities will be
sold to us is yet to be seen. The new
british issue has not been formally Of
fered here, and considerable doubt
exists as to the willingness Of our in
vestors to take any large amount of
/ foreign war loans. As to our own
stocks and bonds, it is not now be-
| lieved that they will be returned in a
/ volume greater than our market can
absorb At present good American
| bonds are selling on basis that COM
pares favorsbly with that Of the pres
| ent British war loan. Our stocks offer
| even more attractive yields. The sug-
/ gestion that English government loans
| be made tax free and so. by inducing
/ the sale of other securities, force back
ours, for which a ready market is Of
| fered. came 10 nothing.
! Such an expedient would unnecessa-
rily depreciate England's own invest
/ ment issues. Years ago, at a former
| period of international stress, II was
enacted that English trust funds could
be placed only in home mortgages and
government issues. Later, as funds
accumulated, the list of trustee in
vestment was widened TO take in final
! ly large number Of corporate secu-
rites. These, purchased IN good faith,
suffer as TIE rate on government loans
is advanced. 1t would be difficult
q n oddtfNnn IN dIen vi IN, -
against them in taxation.
Little Cause to Fear Foreign Selling.
As TO the amount Of our securities
owned in England there is no agree
ment. In the last two weeks fear has
been shown in some quarters that a
food Of foreign liquidation such as
was spoken of when our Stock Ex-
change was closed might be impend-
ing Certainly some large holdings OF
British corporations cannot be sold
They are necessary if these corpora
tions are TO do business here.
Private holdings Of our stocks and
bonds abroad are not so important as
they were in the days OF the Granger
I agitation, when railroads were de-
nounced as expressing the American
public TO enrich European owners.
After the Boer War had lowered
prices of British issues, published sta
tistics Of some roads showed the per-
centage of their securities owned in
Europe drastically cut down. Since
then we have placed other stocks and
bonds abroad, but the Balkan disturb
ance and the events Of the last eleven
months have acted to reduce the sup
ply. Liquidation from abroad has APP
, parently been increased somewhat by
the new British, financing, and may be
expected TO grow with each rise OF
prices in our market. That il will