The New York herald., 1922-10-30

FINANCIAL NEWS
AND COMMENT
Motives Behind Selling of New
Z. s. Treasury Bonds Are
Well Hidden.
WALL STREET PUZZLED
VariOuS TheOriaS Advancad-
WALL STREET PUZZLED
Various Theories Advanced
Stock Market Suffers De-
preston in Week.

veloped last week in the persistent SELL
ing in the open market of the new
United States Government Az per cent.
Treasury bonds. The constant pressure
directed against an issue for which
there was a widespread demand fort
night ago was more or less a paradox,
and although all sorts of explanations
water A long term United States Gov
ernment obligation bearing Az per cent
interest and selling under par in the
present state of the money market is a
hard nut to crack.
Taken one by one it is not difficult
matter to break down the various theo-
ries advanced to account for the weak
ness. First. 1t was said in some quar-
tiers that subscribers. fearing tremen-
dous oversubscription, had placed orders
for more bonds than they really wanted.
| That is true; they did. But, the story
goes on, allotments were on a more
liberal scale than had been generally
expected. and purchasers received more
bonds than they desired, so they began
to sell them in the open market. If that
is true 1t is true only to very small
extent. and a comparison Of the figures
OF subscription with those Of allotment
seems to eliminate the theory at once.
Long VS.. short Term Bonds.
| Another theory put forward was that
the new bonds were merely moving into
line with respect to yield. &C., with
The outstanding Liberty issues. That. OF
course, is ridiculous. for there is absolute
ly no reason why a twenty-five to thirty
year Government bond should sell on the
same basis as a comparatively short
term obligation. Equally absurd is the
belief that pressing credit conditions
are responsible. Certainly the situa-
ton in this country with respect tic
credit has not changed with such VIC.
lence in a couple Of weeks that Gov.
only a fortnight ago should now bt
at a discount Of more than 1 per cent.
ar they were at their low point OF
Friday.
part in the sharp drop of these bonds
The whole bond market was weak dur
ine most of last weeks trading, du,
largely to selling for the purpose o
providing funds for business expan
sion. This is nothing new; 1t ha
been going on for several weeks
Nevertheless, 1t unsettled the whole In
vestment market and may have hat
some effect on the Government bonds
At the same time Liberty bonds wer
very low; they had been sold heavil.
month ago in anticipation of tn
Governments new financing and som
of them got down to points wher
their yields were quite attractive. I
Is reasonable to assume, therefore
that there may have been some switch
ing from the long term bonds to tn
lower priced war loans, although thi
probably fails to account for any ex
cept a small portion of the selling o
the latter.
The credit situation has not suffered
materially in the last week, and al
though call money rates have huctu
ated rather widely. due to withdrawal
of funds by interior institutions whei
the rate was little too low to attrac
them, the Federal Reserve statemen
on Friday presented a pretty goot
picture of conditions generally. In
stead of expanding their borrowing
member institutions last week wer
able to reduce their indebtedness
through rediscounts by more than $40.
o00. 900. very good showing indeed.
1t Is interesting at this time to not
the course of borrowings at the centra
bank for several weeks back. TIL
course has been pretty steadily upward
following along the line of bushes
Improvement and expansion the countr
over. Car loadings. less unemployment
bond liquidation--in fact every funda
mental change of Importance ha
pointed to the same thing. Rediscount
reported by the Federal Reserve sys
tenn on August 9, for instance, stood a
ssS2, ,161 900. including Government a
well aa commercial paper. Last week
statement showed total borrowings o
Sass, $4,000. an increase in a little NOR
than two months OF $S. .23S,000.
Reserve Rcdiscounts.
Going back one week, Il is to be note
that rediscounts stood at their highes
point of the movement, namely, 1924,
5000, which represented an increas
over tho August 0 figures Of S142
625. 900. or course the higher figures o
the two weeks preceding last week wer
linked UP with the preparations mad
by banks throughout the country to alb
sorb the new Government bond issue
Nevertheless, the difference betwee
October rs rediscounts and those O
August Q presents a very interestin
picture. Also Of interest and significan
of the business Improvement IL the In
crease in Federal Reserve note circula
tion from ,147.223.00 early in Angus
to S2.320,115,0 900 on October IL. TIL
total last week was s2,29s,536, 900.
The last week In the stock marke
was a very unsatisfactory period. Weak
ness was the chief characteristic an
what Wall Street pleases to call tech
nical considerations" were almost en-
tirely responsible. After the reactio
of a month ago stocks rebounded IA
too sharply under the impetus OF stoc
dividend talk and the break OF las
week was Inevitable. That II went pei
haps further than was necessary {
correct an overdose speculative positio
probably was due to the lack of publ
participation.
| Foreign exchange movements las
week were wild and erratic and for tn
most part rates suffered severe ds
clines. Political disturbances in Ems
| land and on the Continent, togethe