Evening star., 1921-10-27
.CUT INFEDERA[
RATES IMPORTANT
Secretary Melons Tender
of Certificates at 4 1.2 to
4 IA Rate Will Help Trade.
BY I. A. FLEMING.

BY I. A. FLEMING.
Secretary Mellon gave the banking
fraternity and many intending in
vestors seeking Treasury certificates
as the medium of employment for
their money a'decided surprise when
he announced the rates for the No
vember issue Of certificates as AZ
for six months and ~ per cent for
September Is. 1922, maturity.
While the banking fraternity ex-
ing rate Of the government below 6
per cent, they did not look for any
thing as low as ~ or even Az. al
tnough admitting the probability of a
~ rate for short-term maturity.
Ihe small amount of the issue,
$lOO,000,0OO, tnsures its speedy ab-
sorptfon with assurance that it viii
be oversubscribed.
In all probability the general pub
lie Will not be largely represented in
this Notation. certainly not as gem
orally as in all other certificate and
short-term note issues
The banks will take the certificates;
many corporations not being able to
use their money in business will find
temporary employment for it in these
certificates.
Bankers express the opinion that
the 4hs will go better than the ANS,
naturally.
Interesting comment is made bv
bank officials regarding the action Of
secretary Mellon in reducing the
rate OF interest to the levels that he
has.
Generally-the feeling is favorable
to the belief that lower rediscount
indicated by the action: that business
generally will be greatly helped, as
rates cannot go down and the banks
continue to hold for 6 and z per cent
on good loans.
1t is believed also that mortgage
housing and building operations
generally will be materially benefited
through cheap money.
In word, this action of the
Secretary of the Treasury has set
the stage for business revival"
their stocks to run low. railroads
have neglected upkeep and repairs 70
produce net earnings, the general
public has held tight to it's purse
strings and accumulated money.
6ank deposits h.ve iucreaseu.
So great has been the demand for
investments of a safe and sane char
acter, especially government GER
tificates. that every issue of Treasury
certificates is at a premium. while
the three-year notes ore quoted at
1917 to 102.
The action of Secretary Mellon is
practically certain to give liberty
bonds a sharp advance. and it will
have direct and far-reaching effect
on the bond market.
1t Is questionable whether ANYTHING
can improve our foreign trade at this
time, but the great home market, the
| home market of 110.000,000 buyers, the
greatest in the world. with the best
paid workers. with the best money in
! the world, should respond in a grand
| trade awakening to the announcement
! Of an abundance Of money and the
| lower rates prevalent.
Governors of the various federal re-
serve banks should not delay long be-
discount rates and let the great re-
| habilitatlon movement proceed with
gathering speed.
Another bond issue will be greatly
helped by the lowering rate of certifi-
| Gates. Land bank bonds paying S per
cent will show a quick response to the
| lessened competition.
Thus the entire bond market, and
even stocks, should improve, as this
very serious competitor for the public
l investment funds Is made less danger
GUS through the less attractive rates.
Secretary Mellon has been given credit
for great financial foresight, and bank
ers believe that the present action viii
| make for business revival
! A few days ago attention was
( called in this column to the greatly
| increased money supply and the
| chances for lower rates in the imme-
dfate future. The prediction has SO
far been realized. but last evenings s
| ury gives promise of even greater
things in the money market
The $90.000.000 credit with the banks
and the proceeds of the present GER
| tif1cate issue will carry the Treasury
over to December, perhaps December
Is, when large maturities and the last
installment of income taxes for 1920
will call for further financing.
1t has been the custom of the Sec
| retary of the Treasury to consolidate
sues in three-year notes with these
quarterly periods. On these occa-
| sions he has ordered both certificates
! and notes.
Some bankers are wondering
this custom s with DeeemSer s iSa''hos oT
whether. because of the easier trend
in money and the practical certainty
| Of lower rates. he will not wait for
the stabilization of rates before do
ing any financing for the three-year
| period.
| Had the Secretary waited until the
! present time on his three-year ST
| and 5h per cent notes, he would have
| been able to have made a great saw
| ing infthe matter of interest. A three
| year note issue at AZ per cent would
be snapped up at this time.
| Taking all in all. the action in re-
| ducfng the rate is the financial news
of the day. and of great Importance.
Local Securities Active.
| 1t is possible that the diversion OF
funds held for investment in Treasury
| certificates to the local bond and
stock market was at least partially
| responsible for the increased trading
on the exchange. Bonds to the face
| value Of $1S,500 were traded in, and
all sales were at strong prices. The
! Potomac Electric Is sold at 100, the
| consolidated 5s at S6h, Washington
Gas 5s at 80, Railway 4s at 59H and
Capital Traction Is at S9E.
! These prices were all decidedly
| strong, although not fully refiectine
effect of the easier money trend as
yet.
Capital Traction shares were verv
firm at 8S. The earnings made public
|, yesterday in this column were satis-
factory and indicate the continuation
Of dividends on the present basis is
practically assured.
Lanston was soft, selling at TIN
to TN. Columbia Title. shares
! brought 5.