Evening star., 1926-04-18
CONFIDENT BUYING
GIVES BONDS BOOST
Feature of Week Is Way
Market Ignored Weakness
in Stock Shares.
BY GEORGE t. HUGHES.


Special Dispatch to The Star.
NEW YORK, April 1.-THE up
ward movement in the investment
market as typified by high-grade
bonds has made further progress this
week, under buying of the most con-
fident sort.
United States Government obliga-
tions and the first mortgage issues of
the most prosperous railroads, the
kind of bonds the law allows savings
banks to buy. have been the leaders
in q remarkable demonstration. New
high records for the year have been
established by three Of the Liberties
and by the most recently offered
Treasury bond, the 3% per cent issue
put out only a month ago. In the
railroad group new high prices have
been common.
From time to time the buying
broadened out to include securities in
the grade just below the best, but
here demand was more selective. In
the main interest was confined to
bonds about the quality of which
there could be no question.
Stock Weakness Ignored.
One of the most interesting fea-
lures of the situation was the way in
which weakness in the stock market
and in speculative obligations gen
orally was ignored in the investment
list. AT no time this year has there
been a more striking contrast between
the two markets. The difference is
not hard to explain if attention is di-
rected toward the one fundamental
factor which is operating certainly in
the bond market and probably in the
stock market, and that Is the con-
tinued decline in commodity prices.
Then again bond buyers have paid
a good deal of attention to the money
situation, which has been apparently
of no interest to stock spectators.
At one time during the week time
funds were offered as low as As per
cent, with Az per cent bid, and this.
taken together with the release of
huge sums hitherto tied up in specula-
ton, gave additional impetus TO the
advance in fixed rate interest-bearing
securities.
At the end of the week the average
for all grades of domestic bonds was
almost up to the high of the last week
in February, which up to that time
was the highest since before the
United States entered the World War.
How much further the advance Will
go is. of course, a difficult question
to answer, but at this writing there IS
no sign of a halt, and there are not
lacking authorities to predict that
United States Government obligations
will sell on a 31a basis and that the
best of the old-line first mortgage
rails will draw near to par. This
forecast may be too bold, but at least
it is not lightly to be dismissed.
Discriminate in New Issues.
New issues are received with the
same discrimination that is shown in
the market for seasoned bonds. That
is to say, anything strictly hlgh
grade. such as, for instance, the $ll,-
900 900 Pennsylvania Railroad equip
ment trust certificates offered FRIDAY
at an average yield basis of 4.67 per
cent, are quickly snapped up, while
ANYTHING of a speculative nature re-
quires a good deal of energy to sell.
The truth is that the speculative fever
has abated and money is now going
into sound investments without too
much regard TO the yield. The only
exception is in the foreign group,
where buyers are still willing TO take
some risk if the return promises sum
cient compensation.
The fashion in foreign investments
lust now favors the South American
as opposed to the European obliga.
tions. The French situation eXer'
cises a more or less depressing lnflu-
ence in Europe. French francs TINS
week sold lower than ever before III
history. French dollar bonds yielded
enthusiastically. German issues were
better supported. The opinion Is
hot
conditions in Germany are working
ont better than expected and the mar
ket reflects this idea in measure.
AS to French affairs, the belief is
sometimes expressed that all France
needs TO do Is to reach some agree
ment with the United States on her
war debt and then additional credits
will be extended that will put France
on her feet 1t is little hard 10 see
how any new French financing could
be done in this country on reasonable
terms with the old French dollar
bonds selling on such high ylelo
basis as they now do. American in
yestors would be pretty sure to de
mand a high rate for their funds no
matter what terms France might
make with the United States Govern
ment.
New York Bond Bill.
In the domestic field close watch is
being kept on the progress of the bill
| to make public utility bonds legal in
vestments for savings banks In New
York State. The lists are being
combed to find issues that would
Justify under the terms of the pro-
posed law. AS it stands how there
are telephone, gas and electric light
bonds which give a higher return
than railway issues of comparable
safety simply because they have not
been up to this time legal invest
ments. The market for these bonds
is very firm. The situation with re-
gard to the obligations of public
utility holding companies is not SO fav-
orable. although no special weakness
has developed. 1t is another illustra-
ton of the current demand for only
the most conservative securities.
There has been some buying this
week of railroad bonds of systems in
volved in proposed mergers. The
notion that a combination would in
itself strengthen the security back of
such bonds Is, however, not so pop
ular as it was in January and Feb
ruary, before the Nickel Plate decision
was given out. Rather, attention is
naid more to intrinsic merit, which is
another sign of the prevailing invest
ment temper.