Evening star., 1925-07-19
BONDS SELL OFF
ASSTOCKS CLIMB
Sagging Quotations Due to
Rates on Money, Bank Sales
and Other Factors.
BY GEORGE It. HUGHES.

Special Dispatch TO The Star.
NEW YORK, July 1S.-While rising
prices and Increased activity have
been the rule in stocks. the week In
the investment market has been one
OF sagging quotations.
There have been no important de-
clines nor has there been any liqui-
dation to speak of, but there Is no
longer a bidding up of quotations such
as was characteristic Of trading a
month ago During the first half OF
the year, as a general rule, stock ana
bond markets moved together, one
being strong when the other was
strong and weak when the other was
weak.
This correspondence no longer holds.
Even the day to day fluctuations IN
money rates as evidenced pS
the charges for call funds on the stock
Exchange have been without effect on
the bond market.
Big Banks Selling Bonds.
Study of the quotations for typical
bonds does not tell the whole story.
When money was extremely low all
last year and up to July OF this year
or thereabout, banks which had sur
plus funds found it more profitable TO
buy bonds than to loan the money at
the prevailing interest rates. Ihey
reasoned that they could afford to
take the chance of selling at small
loss in return for the better yield on
their money in securities than any
where else.
Acting on this theory, they accumu-
lated large blocks of high grade bonds.
Some of these bonds are beginning TO
come back upon the market. but they
are not being offered at any sacrifice.
e. le ~ "a
which are sellers, and they have been
conducting their operations very eau
tiously.
Dealers Heavily Stocksd.
The selling has been done 80 grad
ually as 10 have little effect on prices.
If, however, the movement should be-
come general. spreading to the coun-
try banks, naturally there would be
some price recession.
Dealers are in much the same situa-
ton. They, too, have bonds purchased
chased at high levels which they are
at high levels which they are holding
actually to press them upon the mar
ket When they do that also will
have a depressing effect. And. OF
course, the time will come when the
dealers are ready to sell. Meanwhile
these conditions make for stagnation.
Back of all this is the conviction
that as business improves In the Au-
tumn, as 1t Is now confidently expect
ed to do, there will be a hardening in
money rates, selling OF bonds and a
lower market level. 1t must not be
understood from this that any one ex-
poets any substantial decline. but only
that prices normally should go lower
in the next few months.
u. S. Issues Show Trend.
Government obligations are perhaps
the best example of the trend. The
high prices for Liberty bonds and
United States Treasury issues were
reached in the first ten days OF July
and the tendency has been downward
since that time. There Is nothing in
this situation which should disturb
the individual investor. 1t Is simply
the usual sequence of events, follow
ing upon Improvement in industry.
Nor has it any bearing upon the fu-
ture of securities which depend for
their investment rating upon the
status of the particular trade repre-
sented.
Illustrative of this proposition the
bonds Of copper producing companies
may be taken. For the first time in
months it looks as though the price of
the copper metal is headed upward,
and confidence that such was the case
has been reflected in the quotations
for the fixed interest-beartng obliga-
tions of the copper companies. Prob
ably the same will be true OF the
bonds of corporations representing
other industries the outlook for which
Is becoming brighter. AS far as the
railroads are concerned, second grade
and speculative issues will move as
sentiment changes toward the fortunes
of the individual carriers.
Less Merger" Bond Buying.
There has not been so much buying
this week of junior railroad bonds on
prospects Of mergers and consolida-
tions. Rather there has been more
attention paid to actual earnings,
which is a healthy sign. 1t may be
quite proper for spectators to buy
stocks because of expected benefits
from consultations, but investors
ought TO look to other considerations.
1t is very difficult to read the foreign
bond market, for these securities
prices seem Indifferent to good and
bad news alike. French and Belgian
bonds scarcely move, notwithstanding
the doubt about the finances Of their
respective countries.
On the other hand, high yields are
still obtainable on the obligations Of
governments the financial position Of
which is greatly improved. Some Of
the new foreign loans have not gone
very well. Yet the seasoned issues
have not seemed to suffer
The fact is that the American in
vestor in foreign bonds has adopted