Evening star., 1924-08-17
BOND TRADING MYSTERY

Lively Speculation in Old German
War Issues Puzzling to Finan-
cial World.
BY GEORGE T. IGHEs.
Special Dispatch TO The Star
NEW YORK. August Whether
speculative stocks have gone ur
faster than the trade situation war
ranted is Il matter upon which two
opinions are possible. There can be-
no doubt, however, that investment
bonds are still behind money rates.
The high point in the bond market
this summer was reached on July -.
when the average price of forty do
meStlc corporation issues was 81 GO.
but in 1922 the average for the sam
group was S2.5.. aad money iy
cheaper today than il WAS in 1922
The difference is not large but Il
least it is significant This is IL,
outstanding feature Of the investmen,
market as the week ends.
interest Trend Downward.
AS to interest rates. the situation
is unchanged from week ago. Cen
orally at this season there is dis
tinct stiffening Of charges. This year
seems to be an exception. In one
particular the trend seems to b.
downward rather than upward. a
few transactions in short dated com
mercial paper of the highest grad"
were reported this week at "a per
cent, or lower than anything in tn"
past ten years Nor has the cut in
the rate of the New York Federal
Reserve Bank a week ago resulted
in any increase in rediscounts. On
the contrary, there has been fall
ing off from the preceding week, the
respective ngureS being s29, ,5Jo.h0h
against s31.12O. 900. This is for total
bills discounted.
The comparison with the same
week in 1928 is striking. At tina,
time discounts totaiied $la5,625.eo"
The peak was over $@Sa.opt,o0o IN
1920 At no time since tn" Federal
Reserve system was established ha:
there been such plethora Of unused
credit.
Government Bonds Steady.
All this condition has been brought
about by the huge gold imports. Tn"
latest reports show that total stocks
of gold in the United States on Au-
gust i were s4,511. .4s3.901- The gain
during July was s26.167, go. This Is
the smallest increase for any month
in the year to date. and perhaps II
portends a slackening of the inflow
However that may be, the effect VIII
remain for long time.
Government bonds are lltt'"
changed on the week the only n.~
high record established being for
the Treasury 414s, which is the long
est maturity. On the other hand, th,'
list has been very steady ON Sep
tember II the Government has us
next financing to accomplish. II"
indications now are that the Ireas-
ury will be able to market its paper
at new low since before the "orid
War Under these conditions thers
is no immediate prospect of any
weakening in investment securities
German Loan Chief Topic.
Turning to affairs abroad the chief
topic of interest is the prospective
German loan. Assuming that the con
ferees in London come to an unuer-
standing. market conditions indicat"
the success of the offering. " hlte
the buying of foreign bonds both Tor
speculati and investment, has not
been as enthusiastic this week as
last, the average price mas advanced
to new high point. sentiment
toward foreign securities Is more
favorable in the East at least than
at any time in the past two years.
The investment bankers VINO Will pe
called upon to underwrite the new
loan profess confidence in their abil-
| ity to place a properly secured Ger
man bond with the investor
There has been q good deal of talk
| this week about the terms OF the
| loan. but all of it is probably guess
| work 1t is plain. however that the
| return will have TO be made attrac-
tive if it is to compete with the out
standing dollar bonds OF European
! nations already available in thlS
market While the investment yields
| obtainable have decreased somewhat
during the recent advance in foreign
| bonds. some of them are stlil hlsh.
| Probably the buyer of these German
| bonds will receive at least per cent
| to compensate him for the FISK.
Bond Speculation Mysterious.
| One curious development of the
past fortnight is interesting in this
connection That is the story OF
stupendous profits made by specula-
| ton in old German war bonds. No
| one seems to know Just now 1hlS
speculation got its start, or upon
what it is founded. There seems To
be a vague idea that in order TO Sc
cure the success of the Dawes plan
the German government Will have I"
do something for the holders oi
these war bonds. The German tinan-
cial press has done all in its power
to discourage the movement, but
without much success. 1t would
seem that Americans who were
burned" in the German mark mania
following the armistice would have
learned their lesson. 1t would be un-
fortunate if the result should be con-
fusion in the public mind between
these old German war loans and the
new dollar bond issue to be put out
in connection with the Dawes plan.
Investors Changing Front.
Probably the German government
loan will be followed by offerings for
the account of German industrial
| corporations. Certainly S200,000.000
is but a beginning of the work Amer
lea will be called upon to do in the
financial rehabilitation of Europe
This will involve remarkable
change of front on the part of our
investors.
The most potent influence in bring
ing about this change will have to be
the attractiveneSs of the ipyestment
return compared with domestic Sc
curities. Nothing else will persuade
an American bond buyer to send his
money outside the territorial limits
of his own country.
Copyright. 1924. by Consolidated Press