Evening star. [volume] (Washington, D.C.) 1854-1972, 1924-11-16
MOVE IN LIBERTIES
FEATURE IN BONDS
Government Loans Sold in
Some Instance to Get High
er Yields Elsewhere.
MONEY RATES FACTOR
Weeks Trading Sees Considerable
switching-Improvement in
Business Outlook.
MONEY RATES FACTOR
BY GEORGE r. HUGHES.
pecial Dispatch to The Star

BY GEORGE T. HUGHES.
Special Dispatch to The Star.
NEW YORK, November 10. - TIL
feature of the investment marker
this week was found not in the
activity and strength in the low
priced railroad bonds, although this
was indeed striking, but in the action
of United States Government loans.
Early in the week selling move
ment developed in all the Liberties
and in the Treasury 4i4s, carrying
them down sharply from the prices
prevailing just prior to the election
The decline was the most marked in
the Treasury 4hs simply because
they were the issue selling at the
highest price. To a lesser degrce
the same phenomena was observable"
In high-grade railroad and industrial
securities.
Harder Money One Factor.
a number of reasons were SUI
gested for this development. on,
was the slightly harder tendency IL
the money market. In itself, this i
scarcely an adequate explanation, a.
while there was some firming-up Of
rates for time funds for the longer
maturities, 1t was not carried far
Another suggestion was that pro
cess of switching was going on from
the yielding into the higher
yielding bonds. This is the NOR
convincing theory, but it apple
rather to individual investors THAI
to banks, which are the largest hold
ers of Government bonds The prob
abilities are that j.; was expectation
of higher rates for money. rathc,
than their actual arrival, which in
huenced the selling of Liberties
Good Deal OF Switching.
AS 10 the corporation obligations
1t is no doubt true that there has
boon a good deal Of exchanging Of
holdings This. however, has nothing
to do with money market conditions
Ii was simply a sympathetic reac-
ton TO the speculative enthusiasm III
the stock market. With rising price.
for all sorts of speculative stocks
based seemingly on an improyin2
business outlook II is not surprising
that investors felt inclined to abandof.
extreme conservatism
How much farther this evening m
process will go-that is, a decreasins
OF the spread between the prices o.
nigh grade investment and Of the
second-grade bonds-depends both
upon developments in money and
upon the business outlook. 1t has
Deen noticeable this week that while
time money rates were harder there
was little corresponding firmness in
the commercial paper market.
The Federal Reserve Bank weekly
statement gave no indication of any
immediate change in the longer range
credit prospect. And, while business
reports are favorable, they will have
to become much more SO before the
forecast of the stock market Is
justified.
Trading Is Conservative.
In more speculative railroad secur,-
ties the market this week has been
a repetition of that of the precediul.
one, but at a more moderate paCs
For one thing the action of the SoutI.-
ern Pacific directors in rnaintatnirs
the regular dividend instead of rails
ing IT TO per cent, as the more
optimistic had confidently predicted
served TO curb speculative excess.
1t had been argued that there was
no longer any reason why railroad
dtrectorates should fear to incrcast
dlVidends because of the possible
political effect. That has been ON,
OF the excuses advanced for the per
sistent dividend conservatism of til,
Atkinson board. II is doubtful
whether this motive was ever a.
powerful as Wall Street imagined il
TO be. Certainly no such considcru
ton influenced the New York Central
or the Southern Railroad manage
ments when they found the time ripe
Tor recognizing the claims of their
stockholders. Talk aof higher diyi-
bends and of initial disbursement.
is still widespread in speculative
circles, and 1t may be as far as the
spectators go that the talk serves
the purpose.
Less Merger Talk Herd
Not SO much has been heard thi.
week about mergers. Further liebts
on the attitude of the Interstate Com
merce Commission on this subject *
awaited.
There is a direct connection be
tween all these developments bear
ing upon the investment status OF
railroad stocks of the better grad.
and the bond market. 1t is rea-
sonable expectation that taxes will
be reduced, IL not at the coming
short session then when the new Con-
gress assemblies. If any substantial
relief is given to those who now pay
the higher surtaXes the investment
attraction Of good common stocks
Will be greatly enhanced.
AS il is now the rich man is a
large investor in taX-eXempt muniC-
ipals simply because he finds thai
his net income. tax liability consid-
cred, is larger than If he bought tan
able stocks. Any decrease in tax
alton will surely bring about
greater interest in stocks at the cX-
pense of municipals. Not a few econ
omists arc of the opinion that 1t has
been too easy for State and city gov
ernments to borrow when taX-cx-
empt securities could be sold so read
lily and these authorities would re
gard II as beneficial to the general
situation if some sort of check
were put upon this orgy of municipal
extravaganza.
Foreign Bonds Active.
In foreign bonds the week has
witnessed considerable investmen1
buying, but not enough materially to
influence prices. With SO many do
mestic railway and industrial stocks
selling rather on future prospects
than on present income return, one
would naturally suppose that more
attention would be paid to foreigr
bonds where the current yield is very
high, considering both the risk and
the political and industrial improve
ment abroad.
Copyright. 1924. by Consolidated Press,