Evening star. [volume] (Washington, D.C.) 1854-1972, 1925-05-17
BOND PRICES TOUCH
/ BEST 1925 MARKS
Liberty Loans Extra Active
During Week-Great In
tereStS in Rails.
BY GEORGE t. HUGHES.


Special Dispatch to The Star
NEW YORK. Nav 16.-The invest.
ment demand is still very strong, and
domestic bonds rejecting the situation
are on the average higher than at any
time since 1917, while foreign issues
are selling above anything recorded
since 1922. Further gains have been
mace this week, but the movement
was only a continuation of that in
progress since the beginning of the
year. There was reaction in the
e0&iy Spring. coinciding with the
break in the stock market, but it did
not go far, and all the lost ground has
now been recovered.
The impressive feature is that all
grades of securities with fixed inter
est return have participated in the
upward movement Most of the active
United States Government loans have
inns week made new record high prices
Tor the year, and in one case, that of
Inc Treasury As, a new high for all
Time. The other Treasury issues and
Inc LlbertyS are still well below the
hlsh point of midsummer in 1924, but
they are Slowly approaching that level.
Banks Buying Legal Rails"
AS far as Government obligations
are concerned, possibilities of con
tinued price appreciation are obvious
~ limited. Banks are probably the
only purchasers, and their operations
are governed by the fluctuations in
their surplus and account. ANY large
increase in demand for money by the
business interests would be at once
rejected in the selling of Government
bonds, and so tend TO check the rise,
II no more. The case is different with
the better grade of railroads and the
utility descriptions.
first mortgage, so called, legal rails"
and other financial institutions, as
well as private investors, take the
utility bonds and certain other indus
trials. There is evidently more op-
portunity here for additional ad-
Vances. Influences are the increase
in savings, the lower commodity lev
els and the abundance of money. An
other important factor is the prospect
of tax reduction bringing back into
the market some of the investors who
now confine their commitments to tax
exempt municipals.
1t is interesting to note in this con-
neCtion that so far the market for
municipal bonds has not been ad-
versely affected by the larger interest
taken in the taxable securities. In
other words, the demand for high
grade municipal obligations is still in
excess of the supply, both States and
cities to a large degree having financed
their immediate requirements.
Bond Strength Explained
Causes for the more confident buy
ing of foreign bonds are: First, evil
dences of a stronger financial situation
on the other side, of which the return
of Great Britain to the gold standard
is the most conspicuous sign, and,
second, the search for higher yield
than is possible in securities under
present conditions. 1t is hard to say
which of these two influences is pre-
dominant. The important develop
ment of the week was the announce
ment that negotiations for the fund
ing of the French war debt to the
United States Government has at last
taken tangible form.
This particular problem is the one
great obstacle to complete confidence
in the foreign investment field. Once
removed, progress ought to be rapid.
French bonds have been moderately
higher this week, and so have the OBJ
legations of the other continental
European nations and cities. The time
will come when, looking backward, the
and per cent yields on foreign
securities now obtainable will look in
credible. 1t is only question of opin-
ion how long a period must elapse
first.
Turning to the speculative domes-
tic market the rails have been more
prominent this week than last but
buying has been based more on mer
ger possibilities than upon invest
ment values. There is always
danger in following such a move
ment however profitable it may be
for the time. In a sense the whole
outlook for railroad consultations
l. diCnnCitinn of the
Nickel Plate proposals by the Inter
state Commerce Commission. If this
plan goes through, even though
amended to meet the objections now
raised by minority stockholders OF
the Chesapeake and Ohio, it will give
an enormous stimulus to speculation
as to other combinations.
Probably nothing has done more to
keep I'D interest in this subject than
the entering into the situation of
President Loree with a proposal for
fifth rate new continental system
utilizing the long dormant plan faith
cred by the late f. H. Hartman for
new road across Pennsylvania. 1t has
been generally supposed that the day
of railroad extensions on any large
scale was long passed. Evidently this
view is not unanimous and there are
still railway men who have faith
in the future of their own industry
Railroad car loadings show traffic
to be moving at record rates, but rail
way earnings are very irregular. The
best showing is being made by the
Southern lines as group. The New
England roads have been doing better,
hut there has been a falling off on
some of the large Western systems.
The Spectator can afford to disre-
gard fundamental facts like this while
the market is going his way, but that