Evening star., 1925-10-18
NOTABLE ADVANCE
. IN FOREIGN BONDS
Locarno Agreement Called
Most important Move Since
ArmiStice.
By GEORGE T. HUGHES.
Special Dispatch to The Star.

BY GEORGE r. HUGHES.
Special Dispatch to The Star
NEW YORK, October 1.-THE
chief development of interest in the
investment market this week was the
rise in the average price of foreign
government bonds to the high of the
year, which, incidentally, was high
er than the best level reached in 1922
The advance was all the more re-
markable because 1t came while pes
simism as to the French financial out.
look was increasing. German obliga
tions, especially the per cent loan
hoated in this country in aid of the
Dawes plan, We're the leaders, but
some of the recently issued German
municipal loans, which had been
dragging for weeks past, also had a
better market and other European
loans outside the French were carried
along.
IlOcarnO Accord Vital.
The rews affecting the market was.
OF coarse, the accord apparently
reached between France and Germany
in the conference at Locarno, which
was described in some quarters as
the most important happening in Eu-
rope since the armistice.
Now there are two factors involved
in the investment appraisal of foreign
government securities, one of them
the political and the other the tinan-
cial. Evidently the market this week
put more stress upon the former than
upon the latter because there was no
Improvement in foreign finances upon
which to establish rising market for
foreign securities. In fact, the French
situation is rapidly approaching a cri-
SIS, plainly foreshadowed in the de-
Ginning tendency of French exchange,
even though French dollar bonds are
unaffected
1t is not the comparatively small
annual payment to America embOd-
led in the temporary compromise ar
ranSement reached at Washington
last month that makes the balancing
Of the French budget seem so hope
less, nor yet is it the current expenses
OF the government or the inability to
make a further increase in taxes. The
burden comes in enormous charges on
the French internal debt, amounting,
as they do. to - 900 900 900 francs
out of the $4,000 .OOD 600 francs which
Is the estimate Tor next years budget.
Suggested Way Out.
The only way out-and this sugges-
tion came from Paris late in the week
was that there should he 4 horizon
tai cut IN the rate Of interest Of all
French internal bonds Whether or
not the French hondhnlder would con
sent to this sacrifice cannot be pre-
dicted from this side, but this much
can be said:
Unless he does agree to some such
arrangement French savings invested
IN government securities are likely
To go they way they did in Germany,
for the only alternative is new inf'a-
ton. French collar bonds held in
America are in an entirely different
class and would not be disturbed no
matter what is done about the French
internal debt. but until the latter sit
uation is cleared up and an agree
ment reached with the United States
Government on the war Indebtedness
they are likely to mark time market
wise.
But all these considerations were
without influence on the general for
ciSn bond list this week and invest.
ment bankers who have new offer
lnSS TO make are encouraged accord
inSlE. 1t IS interesting in this con
nectlon to note that foreign financing
done in the American market so far
this year has broken all records, the
aggregate for the first nine months
or le2o being over Il billion dollars.
This includes some Si22 .OO0,OOO Cana
dian bonds, which really are not for
elgn from the standpoint of the Amer
ican investor.
Liberty Issue Weak.
Turning to domestic bonds the prin-
ctpal influence OF the week was eX-
pectatton OF large cuts in income
taxes when Congress assemblies again.
One result was to depress quotations
for Liberty 312s to a new low for the
year. This is the one Government
bond which IS entirely tax free. and
30 loses In attraCtiyeneSs Just in pro
portion to the decrease in taxation on
large incomes. The rest of the high
grade investment market was little
changed demand and supply being
about balanced and the higher rates
for day to day loans on the Stock
Exchange being offset by the failure
10 raise the discount rate OF the New
York Federal Reserve Bank
1t must not be overlooked that gold
is again beginning to flow from Lon
don to New York, not in large
amounts. but significant nevertheless.
Nor is 1t likely that demands for bust
ness will show much further increase
In the near future, and by the first
or the new year they ought to fall off.
AT the same time it is almost i'm
possible to attract attention to in
VeStment bonds while speculative
stocks are going up and 10 points
at q time.
copyright. l925D