Evening star., 1925-06-28
GOVERNMENT LIENS
!. FEATURE IN BONDS
Issues Now So High That
Any Further Gains Must Be
SIoW-Money Firm.
BY GEORGE T. HUGHES.

cReclal Dlspatcn TO Inc star.
NEW YORK. June 27.-United
States Government securities furnish
edAthe feature of the investment mar
ketSthis week.
Under concentrated banking demand
prices were advanced all along the
line for the longtime Treasury is
sues, the As and 4l2s to the highest
record for all time and for the
Liberties to the high prices of the
year, and in some instances also to
the best levels since they were first
offered
These quotations were reached in
the early part of the week and toward
the close there was a reaction so that
thee market left off little below the
best.
= Money Outlook Bright.
This slight decline coincided with
the appearance of higher rates for
call money on the Stock Exchange
ana hardening of the quotation for
time funds. At the same time the
general bond market turned dull and
heavy, rejecting the same influences
which affected Government issues.
Probably the more significant fact is
not the reaction of the last few davs
but the advance which came about
earlier
For bankers do not believe that
there has been any real change in the
iong-range money outlook. and they
expect that after the July first re-
GuirementS have been taken care of
there Will he relaxation again and
cheap money will be as cheap as 1t
was at the beginning of June This.
OF course. depends upon the progress
or business. If there should be an
Unexpectedly large increase in inquiry
Tor funds for strictly commercial DUR
poses the effect would be to hold I'D
money rates and perhaps even to ad-
vance them. This. however, does not
appear probable at this writing.
Price Levels High.
1T must not he forgotten in an.
praising the future of the marker that
the present price level is high, meas.
ured by anything seen in the past
eight years. Even though bonds go
hlsher from now on. the rate of ad-
vance must necessarily be very slow
The old-time July reinvestment de-
mand. which was always relied upon
TO stimulate the market at midvear
mas not been in evidence, largely be.
cause investors as well as traders
have fallen into the habit of antici-
patlnS their needs. When money
could be borrowed upon such favor
able terms as al present the simplest
vance of the receipt of July interest.
and dividends paying for them in full
subsequently, and this has been go
ing on not alone this week but for
some time past. In recent years the
effect of the half-yearly disburse-
ments has been noticeable more in the
money market than upon bond prices.
Tax Exempt Bonds Active.
Another interesting feature of the
present situation is the strength in
State and municipal bonds. Buying
or these tax exempt issues has gone
along under the assurance of substan-
tial tax reduction. The inference
seems fair that it is not the tax
exempt provision that all these bonds
carry that is the attraction to pur-
chasers so much as it is the high
degree of security which the best of
these bonds afford.
For long time dealers held to the
opinion that when SurtaXeS were cut
the demand for tax exempt securities
would fall off proportionately. This
view is no longer popular; rather the
emphasis is placed upon the fact that
higher return can be had on the
State and municipal bonds than upon
Government obligations. Probably
heavy reduction in income tax sched.
ules would affect prices for munich
pals, but not nearly as much AS had
been thought formerly.
Turning to investments of lower
grade, there has been d remarkable
letting up of interest in railway Sc
CuritieS. Investors are waiting not
alone the trend of the earnings, but
the outcome of the various merger
plans. Perhaps they have been made
more cautious by evidences of the
lack of harmony among railway eX-
ecutives.
Copyright. 1925.)