The Bridgeport times and evening farmer., 1918-01-11
LIBERTY BOND
LESSONS
By HOWARD sPEER
OF Hincks Bros. s. Co.
Lesson No &c.
ANCHORED
ANCHORED

If you have followed the last few
lessons you have probably gathered
from them the thought that the gen.
eral tendency of interest rates at
present is upward and hat any in
vestment, therefore, which has rate
already fixed will have to decline in
price in order to make the yield equal
to the newer and more attractive
rates that may come along from time
to time.
Of course, one can't state that any
such thing is going to take place with
absolute certainty It is all more or
less theory based on past experience.
And even if such changes do occur
they won't take place tomorrow nor
next month, nor, indeed, at any
special time. They will be gradual
and accompanied by various inter
ruptions to the course that they are
following.
But the fact the government is go
ing to need further large Sums of
money for war purposes rather seems
to point to higher interest rates for a
while at least. And in thinking of
how the government will go about
paying a higher rate we are again
| brought face to face with the two
| possible ways which have already
been mentioned, namely, either in
creasing the rate itself, or selling
something with the old rate at a
lower price. And, of course, the
! something, that the government is
going to sell is another issue of Lib
| erty Bonds.
Let US hasten, however, to point
out that this next issue need not
necessarily be sold at a price to yield
more than 4 per cent. There was a
large over-subscription for the last
issue at 4 per cent. and there is no
question but that certain amount
of new bonds could be sold paying
that same rate. How many is a mat
ter for serious consideration by the
government officials and if they de-
eide that he amount would be too
small to be worth while they will
probably arrange either the price or
the interest rate so that the yield
will be higher than 4 per cent.
Three things are certain. The first
Is that another big issue of bonds is
coming soon. The second is that they
will be sold either at par or at less
than par. The third is that they
will bear either 4 per cent, or less
than per cent, or more than per
cent.
In the last lesson we promised you
something cheerful to offset the de-
cline in price Of the Liberty Bonds
you own. It is to be found in con-
sideratfon of the three things men.
TONED above.
Take the second one first. The gov.
eminent can sell bonds at less thar
par if it wishes to do SO. But th6
best banking opinion is that it would
be so harmful to the price of the ole
bonds as to hurt the sale of the new
ones very materially. 1t would fur
thernore cancel the value attachins
to the conversion privilege of the ole
bonds and thereby make millions O
people indignant.
The Treasury Department is prac
tically committed to selling bonds a
par and is altogether likely to do SO
That disposes, therefore, of tn
method of increasing the yield b,
lowering the price.
Now consider the third enc of thes
three certainties. If they decide tina
a large issue can be sold, bearing
: either 4 per cent or less than De
p cent, they will csme to that decision
only because market conditions seer
to justify it. And the only wa
market conditions can justify it i
by the existing 4 per cent. bends sell
1 ing at par OF very close to it at tn