The New York herald., 1922-11-27
UNCERTAIN FACTORS
HALT BOND BUYERS
Idle Money Awaiting Invest
ment Is Only Biding It's
Time, Says Expert.

Public participation IN the bond mar
ket was still further curtailed last week
and transactions were confined mostly
to action between. dealers and bond de-
partments of banks. Bnsiness In bonds
in the New York Stock Exchange was
materially less and price recessions were
general. New issues of bonds were re-
duced to total of little more than
100000, 900.
Bond authorities take exception to the
theory that the bond market was being
starved by the. business boom and ex-
panding credit. They declare that there
Is no absence Of idle money available for
investment, but that investors have
been rendered wary by the many un-
certainties. I s,:-. ~ III
In the list Of ,untoward conditions can
be placed the fear of selling to establish
tax losses, knowledge that substantial
amounts of bonds are being carried
pending resale by banks, the expected
Government financing and tho menace
of soldiers bonus.
The United States Government s
financing plans perhaps hold the most
interest for Wall Street. Before June
80 the Treasury will be compelled to
provide. funds totaling approximately
$4,000. 100000 by means of tax revenues
and sales Of securities to redeem or re-
fund maturing certificates of indebted
ness, Victory notes and war savings
certificates. Approximately $1,000.000.-
600 must be raised by the Government
to meet maturing obligations before the
end Of the year. The Secretary of the
Treasury may exercise his discretion in
determining whether to offer for sale
short term or long term securities
IOn0 loo could v,nf hoar M
est at a rate exceeding Az per cent.
however. without further Congressional
action. Thus It is fairly well estab-
lished that In a few weeks short term
certificates will be issued by the Gov
ernment.
\ Concerning what happened to the
market when the last Government loan
OF Az per cent. bonds was made c. +.
Childs & Co. say:
prior to the official announcement
October 8, all Government loans were
quoted at premium prices. The general
expectation was that a new issue would
bear less than Az per cent. since the
average yield Of all the outstanding
loans UP to that time, including bonds,
notes and certificates; was less than
4.25 per cent. The designation of a Az
per cent. rate was, a market disappoint-
ment.
The terms of the Offering indicated
that substantial portion of the issue
would be allotted to those who rendered
Victory notes IN exchange. but to the
extent that cash subscriptions were ac-
cepted 1t at once became apparent that
a vast amount of bonds would likely
be injected into a sensitive market and
that the holders Of Liberty bonds were
destined to be disappointed In the ability
of the market TO absorb any more bonds
without depressing the premium prices
then prevailing for the old Liberty loans
Tho effect was equivalent to an attack
instead of stimulating tonic.
This psychological development was
aggravated by,a concurrent f1rmer tend
ency In the money market. When the
allotments were announced and the full
effect OF the large amount Of bonds to
be issued for cash was realized. the ne
cessity of financing ones allotment be-
came a factor which needed ,considera-
tion. To sell ones allotment OF new
bonds Immediately or to sell ones hold
ings OF old Liberty bonds, which had
been acquired at lower levels, was the
choice presented In most cases. There
fore. In the last analysis. something had
to give way to make room for the new
bonds. which. to the extent of about
$500, 100000. became an extra market
load requiring new money.
"It Is never reasonable to expect to
be able to refund short term into a
long term loan and have the new securi-
ties remain In the hands of those who
surrender the old ones. Short term In
vestors do not want long term bonds
and vice versa Otherwise they would
have made the exchange In the open
market beforehand"