Evening star., 1922-10-29
REACTION IN B0Nn1S
IS HARD T0EXPLA|N
Speculative Support, Long
Active in Market, Has
Been Withdrawn.
BY BYRON SELLER.

Special Dispatch to The Star.
NEW YORK, October 2S.-The bond
market of the week was one Of con-
feature was the weakness in the
United States government issues and
notably the new refunding 4As. De-
clininG quotations for bonds during
the previous week were generally ex-
planned as necessary readjustment TO
the yield on the new government
loan. That explanation will not suf-
flee to account for lower prices for
the new issue iself. In fact there are
difficulties with any explanation.
One suggestion was that bonds
subscribed for as a speculation with
the hope of making a quick profit
were being resold when 1t became
evident that there was to be no quick
profit. There has been some sell
ing of this character but the fact
that the government made II so ar
fcult to acquire large blocks-pref-
ercnce being given to subscribers TOT
amounts of not more than Sl0,oo"-is
against this theory.
Causes Difficult to Fix.
1t is more probable that the decline
in the new issue is due to the same
outstanding loans. 1t should be borne
in mind that the aveage bond quota
ton has been declining for more than
a month, long before the new gov
ernment financing was announced
Some attention has been given this
week to the effect on bond prices OF
the advance in commodities. One
large financial institution for It's own
Information made q careful analysis
Of the average price OF high grade IN :
vestment securities today compared
with the average for the same securl-
ties in 1913. Expressed in dollars the
averge nine years ago is higher than
the average today. But when ac-
count is taken of the effect of the in
come tax plus the higher level for
commodities IL was discovered that In
reality at the high of 1922. bonds
were more expensive than in 1919.
That is to say, after the investor had
paid his taxes he could buy less with
the proceeds of his coupon in ls22
than in 1913. Whether or not TINS
theory is correct this particular In
situation acted upon it and disposed OF
prices certainly has shown the prac-
tical wisdom of the move.
Bonds Mny Go Still Lower.
Some authorities believe that at the
present level the decline has dis
counted both the rise in commodities
and the outlook for higher charges
for money. Some large blocks OF
bonds have been taken around the
present levels. Purchasers, however.
are particular both about the, issue
and the price. Other authorities
equally well informed express the
opinion that the reaction will go far
ther. Both agree that the speculative
support which has been so prominent
in the bond market for more than
year has been withdrawn.
AS to the business situation. the
unfavorable features emphasized this
week were two. first disappointing
railroad statements for September.
and. second, signs of impending labor
shortage. President Grace of the
Bethlehem Steel Corporation called
attention to the latter condition. Ac-
cording to Mr.. Grace. this is very
seroius matter in the steel industry,
curtailing operations and delaying
construction work. The situation he
attributes to the immigration laws.
Strike Was Severe Blow.
The railway earnings statements
show that the strike was more dis
astrous than had generally been be-
lieved in the case of certain num-
ber of roads at any rate. Much bet
ter things are promised in the October
reports, but meanwhile the figures
make unpleasant reading.
Outside OF gasoline, copper and
few other commodities. price trends
are upward. notably so in the case
of wheat, cotton. rubber and sugar
Retailers. however. have learned the
lesson of 1921 and they are not likely
to be stampeded into buying large
stocks in anticipation of any sharp
rise in prices. The situation abroad
shows no change in its larger aspect
Foreign bonds, in response to the
acute weakness in all the contin-
entail exchanges, were in disfavor
all the week. AS was to have heen
expected French and Belgian issues
suffered the most The French gov
ernment 112S and SIS, particularly the
latter. We're better supported than
the provincial and municipal issues
This might have been due to pur-
chases for account of the sinking
fund.
French Securities Sound.
No one seriously believes that
there is any question as to the in
vestment rating of French govern
ment securities. Still we have the
phenomenon of an obligation of the
French republic selling to yield more
than S per cent. The price of French
securities with the long ami honor
able record of the people and gov