Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-01-17
BONDS ARE HIGHEST
IN PAST SIX YEARS
Average Levels Lifted During
Week by Buying in First
Grade Issues.
BY GEORGE IT. HUGHES,
Special Dispatch to The Star.

BY GEORGE t. HUGHES.
Special Dispatch to The Star.
NEW YORK, January 16.-The av
erage price level OF domestic bonds
again this week as last, was at new
high, not only for this year to date
and for 1925. but for the past si>
Years. With only minor recessions
quotations for high-grade securities
have been slowly advancing under the
stimulus of an unsatistied investment
demand greater than any one had an
ticipated
The buying this week has been i'm
pressive in that it was not for the
most part in securities where the yield
was higher than the current charge
for money. but in those seasoned, un
DERIVING liens which sell on a basis
attractive only TO financial institu-
tons and the most conservative of in
restors. Certain bonds of this type
sold at the highest price they have
ever reached.
1t must not be understood. however
that the gains We're at any time nu-
merically large. Price changes in this
kind of security. are always small, but
the trend was unmistakablle.
Money Remains Cheap.
Money remains relatively cheap; not
as easy as it was year ago at this
time, but still low. The reserve ratios
of the Federal Reserve banks as a
whole, and OF the New York bank in
particular. show increases on the
week, in the former case from 70.2 per
cent for the week ending January s.
TO 72.7 per cent for the week ending
January 10, and in the latter from
S0.1 to SIS per cent as Of the same
dates. The fact Is that commercial
demands upon banking resources have
not been sufficient to bring about any
enlargement of recourse by member
banks to the discounting facilities of
the Reserve system.
Part of the current decline in dis
count holdings is undoubtedly sea-
sonal, but IL serves to empha size a
condition which makes possible the
strength in the bond market. An
other factor is the extraordinary large
amounts of cash carried by prosperosu
industrial corporations which must
have at least temporary employment.
Hard to Get Per Cent.
Turning to bonds of the second
grade, it is becoming more and more
difficult to get per cent on a secured
obligation protected by demonstrated
earning power. In the railway group
It Is only the junior liens of such roads
as the Seaboard, the New Haven and
st. Louis and San Francisco and the
bonds of certain fractions that Yield
this much.
Whenever scrutiny of the list re-
Veals a bond which gives a return
higher than the average and at the
same time is the obligation of a cor
poration that reports an increasing
margin of safety. that issue is sup
ported, no matter what may happen
to other semi -Snepl1Iat
lions.
In general, bonds of this grade
move or less in sympathy with their
respective stocks. but this is not true
when the conditions are as stated.
Type of Bond Desired.
At the same time, the speculative
attraction is still looked for but prin-
cfpally in bonds which carry con-
vertible privileges or warrants to buy
stocks at fixed prices. New issues
which offered any features of this
kind have been particularly we'll
placed. With the general average
OF stock prices so high and with
widespread uncertainty about the
future of the purely speculative
market, bond purchasers are eager
for anything that combines the
security of bond with the chance
to participate in the profits of the
enterprise if it proves profitable.
This combination appeals espe-
cfally to those who have accepted the
new theory about the advantages of
stocks over bonds for long term i'll
VestmentS. IN this connection more
and more attention is being paid to
the trend in commodities and the
number Of authorities who believe
that over the longer period there is
more apt to be a price decline than
an advance is increasing. II this
view Is correct the principal argu-
ment in favor of the common stock
as against the bond is nullified. Still
there is enough doubt about the mat
ter to make the convertible issue
easily salable.
Foreign Bonds Less Active.
Foreign bonds have not displayed
any great strength as domestic, not
withstanding their much higher aver
age yield. They remain more respon-
sive to political developments. with
more doubt shown about the French
situation than anything else. French
bonds themselves are little changed
on the week, but their low selling
price compared with the high coupons
they all carry is a constant remind
er of the uncertainties of foreign in
vestments. This week. for the first
time. the sinking fund provided for
when the French Republic IS were
first sold. operated to redeem bonds
by lot to a price approximately 8
points above the market. 1t would
seem the large profit accruing to the
fortunate holder of the bonds so
drawn for redemption would serve
10 strengthen the market for other
issues in which there are similar OPP
portunities.
(Convrivht 1921