The sun., 1918-07-02
CANADA EXCHANGE
MARKET STRAINED
Finds 1t Problem to Redeem
Bonds Maturing in
New York.
SHARP RISE IN PREMIUM
High Rates Tend to Discourage
Importations Of, Goods !.
by the Dominion.
SHARP RISE IN PREMIUM
specia, De,patch to rrs suS.

out OF the redemption by Canada Of
bond issues maturing In. New York.
Most OF the recent notations in the
Canadian market have represented, re-
findings. Thus Montrcals ss.ie0.o00
loan and Calgary's 32.3ee. 900 loan were
for the purpose OF taking up maturing
Issues; and as regards the S1.500. 900
loan Of the Province Of Saskatchewan.
$500, 900 represented renewals. Several
other issues of some Importance taken
or by the Canadian investment public
IN May and June were wholly or
Iagely for the purpose Of retiring bonds
now falling due. These maturing bonds
were held fer the most part by in
yestors in the United States, the con-
tracts providing Tor payments Of prin-
cipal and interest in New York. There
fore II has been necessary in connection
with each bond issue so redeemed TO
find New York exchange to cover the
principal sum and the final coupon.
Until the present abnormal situation
developed the Canadian exchange mar
iet was not required to take into its
calculations the problem Of redeemiug
In cash the principal OF Canada's for
elen loans. The market was accus-
toned TO the demand for exchange for
remittance OF interest. and 1t expert
enced little difficulty in meeting such de-
mand but in nearly all instances the
principal money of debts falling due
abroad was met by means Of renewal
loans placed with foreign investors
tie new issues frequently being large
enough to provide some fresh cash after
redemption Of the old ones
strain on Finances.
90 it will be seen that the require
ment under which Canada now labors,
Of taking up in cash many of her foreign
loans as they mature. imposes a consid-
cradle strain upon her finances She
could probably handle the matter with
out difficulty or inconvenience were 1t
not for the heavy annual balance due
10 the United States on trade account
and the temporary tie UP Of her liquid
funds in the form Of credits granted to
England. These large special demands
for exchange. coming on top Of the re-
Quirements Of the importing customers
OF the banks. necessarily forced up the
premium, and under the circumstances
the quotation e7-1S between banks does
not seem out of the way. Possibly a
high premium may be in evidence for a
month or two. until Canada's 1915
wheat crop begins to AFFECT the market.
Recent utterances OF Sir Thomas
White. the Canadian Minister Of FL
nance. lead to the conclusion that the
American. British and Canadian author
tiles agreed at the Washington confer
ences that it was not advisa BILE as yet to
negotiate a loan or credit for Canada q
benefit in the United States. Sir Thoma Is
emphasized the point that the discount
on Canadian funds in New York 10 no
Greater than the discount quoted By
New York on the pound sterling; also
ne drew attention to the fact that ex-
change on Spain and on several other
neutral countries is adverse to the
United States-the discount on United
states funds being greater than the dis
count now prevailing on Canadian
FUNDS in New York. These facts he
mentioned to show that while the ad
verse exchange is troublesome and
costly for Canadian industry and trade
there is no pressing necessity to restore
equilibrium by artificial means.
The further point was made that al
American loan. would be costly, probabl,
requiring an interest yield of 6L to ST.
per cent, and that its effect would onI,
ne temporary. Therefore it seemed t.
ne better to endeavor TO get along 10,
the present without borrowing abroad
meantime endeavoring to cut down tn;
uhfavorable trade balance with tbs
United States through abstaining from
Inc purchase Of many imported iuxurie.
or non-essentials. The prohibition o.
certain specified imports and the specia
AVIATION of expensive luxuries as pro
Nlded In the budget are steps in this di
rection, and Of course the nigh exchans,
itself tends 10 discourage Importation
ny canada and to encourage Canadian
exports Eventually II may be possible
10 arrange for cash payments for
larger proportion OF the British Dur
cnases OF Canadian supplies That is
me United States may grant credits I,
England for an enlarged proportion o
the latters purchases in North America
such development would ease Canada
exchange position Immediately. Also /
must be remembered that the situation
~ oeing helped by the increasing volum
OF american war orders placed here. o.
od'ufday. for instance. announcement
vas made OF the organization Of TIN
.Nortn American Arms Company. CAPT
Allzed at $4,000 900. for the purpose O
manufacturing automatic rev0lyers 10
ne United states Army. In the scours
VI lhree or four months the activities O
ulese various new enterprises shout
nave an appreciable effect in increasin
ne supply of exchange.
The Maturing Bonds.
with reference to the redemption o
maturing Canadian bond issues IL is be
ed mere that the prompt remittanc
VI luhos to New York for this purpose
"HeheVer cash redemption has bee
.sHed Tor, will be instrumental II, en-
nahelAg Canada's credit with the Amer
n wah investment public. Holders of tn
nohtreal, Calgary. Saska tchewan an
oIher Canadian bonds which mature
ecentIy are well aware that Canad
mas had great fnhncial burdens +
ot@rr! IN connection with her war actiy
tes and with the large loans to Eng
.ehn Under the circumstances ther
YOU'D be some excuse IL the obIigant
"N me maturing bonds asked for della
IN payment. but there has been no ind
's,oh OF any such requests.
Nhere no ARRANGEMENT existed for III
pacing Of refunding issues in-the Amer
n"h market the bankers of tho Cana
",sl provinces and municipalities hav
sNays had the funds In New York Q
"s stipulated place Of payment on 0
eIoFe The due date. 1t is likely tina
'n's promptness In meeting obligation
sHcef circumstances admittedly difficu
WIN not be lost sight OF by the Amer
ans WHO held the bonds. When afts
NV maj victory has been won over tn
aohorfed Prussian military system In
NsstoFs In the United States are agai
liberty to place their funds freely I
.'tlsn securities Canada may receiv
.ne!r very favorable attention. Mean
ume II helps the Dominion to some Ell
s"' when permission is given for tn
Hu" OF renewal loans in the Unite
o'"'es In some cases where high IN
crest rates are. asked for renewal
S"""da may prefer TO pay off tine lou III
o4' II the option of renewing is extende