Evening star., 1922-10-15
By BYRON SELLER,
Special Ccrresponden

special correspondent OF The Star.
NEW YORK, October 1.-THE out
standing event in the bond market Of
the week was the announcement by
the Secretary Of the Treasury Of the
long-expected government refunding
issue.
Whatever may have been banking
expectations, the combination Of q *
per cent coupon rate with q long
term maturity was not generally an
ticipated. Certainly the small In
to the Secretary. And it is evidently
the hope OF the department that the
new issue will be widely distributed.
uted.
Investors Of large wealth will con-
tinue to look to entirely tax-exempt
securities
Cotncident with announcement Of
the new government issue was re-
newed weakness In the high-grad
railroad investment bonds. This was
generally explained as directly due
to the competition inevitable under
legation of the United States non
cailable for twenty-five years gives, a
return Of 4.25 per cent, the obligation
Of private corporation. no matter
how wen secured. ought to give more
than $50 per cent. ,
Inc Cou1oo OL QuoIdtlouS oSarU OUT
this theory. There always remains.
however. possibility that the decline
in the price Of the corporate bond is
due to the same cause that induced
the Secretary to offer 50 high q rate
on his new issue. Tho primary con-
sideration in both cases may have
been tho money market It must also
be borne in mind that the high point
in the bond market was reached a
long time before anything definite
was known about the governments
Intentions.
when the Tide Turned.
Quotations for such representative
bonds as Atchison general 4s. Chicago.
Burlington & Quincy general Is and
their highest in July. 1t was about
this time also that the weekly state
ment Of the 100 member banks of the
federal reserve system began to
show for tho first time in over year
q decline In investment and an in
crease in commercial loans Changes
were very small for q number of
weeks. The significant thing was
tho fact that the tide had turned.
Tho meaning of all this as to busi-
ness Is very plain. Reyiving trade
demands more money for. Its legiti.
mate use: Banks which. during the
their idle funds in the purchase of
Investment securities. began to liqui-
date. when tho needs Of their Gus
toners for accommodation began to
increase. So there Is nothing in the
course of the bond market which
should not be encouraging rather
than discouraging to those. anxious
to see Improvement in general COM,
mercial activity. Nor has there bAen
any other development in tho week to
moderate the slowly reviyinE opti-
mism Of the average merchant.
There Is one department of the
bond market in which neither the
money market nor speculation as to
the business outlook Is the governing
influence. Foreign government issues
are subject to an entirely different
kind of control. This Is particularly
continental Europe. Now :. that the
excitement over tho near east has
died down for the present at least.
the, old doubt about reparations and
budgets remains.
Reports this week as to the policy
Of the administration At, Washington
European countries are not to bo en-
couraked unless the proceeds are to
be devoted to- constructive ends.
It appears to be the general opin-
ion that foreign governments must
set their houses in order before they
receive any further aid from the
United States.
All this is reflected in the market
price OF outstanding foreign bonds.
Nowhere else except in highly spec
ulatfve domestic issues can SO high
q Yield be obtained as, for instance;
In French dollar securities. both gov
ernment and municipal. This does
not include the obligation OF Great
Britain, which country is just begin
ning interest payments on its war
incurred debt to the United States.
: British and Canadian bonds sell on