Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-08-15
RED|SCOUNT RAISE
MAKES BONDS SELL
Action of Federal Reserve
Anticipated, But Causes
Slight Declines.
BY GEORGE T. HUGHES.


Special Dispatch 10 The star
NEW YORK. August 1.-THE vent
of the week in the investment mar
ket was the raising of the rediscount
rat" OF the New York Federal Re
serve Bank from 3I2 to 4 per cent,
thus putting il on a parity with the
other banks in the system.
In a general way Wall Street had
been talking about the probability of
this action for n long time, and when
II came il was not much of sur.
prise. a the same time il did bring
about some selling of high-grade
bonds. the most noticeable of which
was in the United States Government
list. Here the declines were sufficient
to depress quotations to a level where
they were nearer to the low than the
high of the year. This in itself was
not a large loss for prices have been
sagginG for some time now. In the
same way there were fractional re
ceSSiOnS in first mortgage rails of
the savings bank type.
The best opinion was that this de
cline would not go much further. AS
matter of fact, the action of the
directors of the New York bank had
not changed the situation at all. For
= month or more time money has
been hardening and the banks have
need for money for commercial pur-
poses increa Sod. . 1t is reasonable to
expect "a slightly higher level for
money until Fan trade requirements
have been covered. but n Sood deal
of that has already been discounted
in bond prices.
Transactions Near Low Mark.
Aside from the incident of the in
creased bank rate. the week was Il
very quiet one. Transactions fell to
approEimately the low of the year.
one reason was the diversion of in
terest To the stock market. Another
MAS the refusal of holders 10 sell at
current levels and the hesitation on
the part of potential buyers to pay
the asking price, producing a prac
teal deadlock.
The market was helped by the com
paratively small volume of new offer
inGS New issues for the week
totalcd around $35. 500 900, which was
an increase over last week s aggregate
of $I0.l50.000, but that was the low
est for more than a year and the
sum in the corresponding week of
1925 was Sll0.750,00o. Probably deal
crs' shelves are pretty well cleared
out Of bonds, and the market is in
good position to absorb the new loans
bly,, also, these will he priced to cor
respond with the present situation iii
the general market
As far as the various groups go,
interest was divided between the more
speculative railroad bonds and foreign
obligations. Operations in the first
named class We're confined to four or
tive special issues.
Railroad Bonds Better.
The railroads as Il whole have
gained ground financially SO rapidly
IN the past year that bonds consid-
cred speculative l. months ago have
worked up into the SemiinveStment
class and no longer offer the same
attraction to traders. There are still
a number of income and adjustment
issues on which interest payments are
n contingent charge, that present op-
portunities for price appreciation. Ad-
Nances in this group were small but
fairly uniform.
In the foreign field the German in
dustrial. provincial and municipal de
scriptions held the center of the
stage They continued to sell around
The best prices of the year. Here,
too, a helpful factor was the let-up
in new offerings. American invest
ment bankers have been looking for
terms borrowers were willing to give
and lenders willing to take have been
wide apart and little new business
has resulted. French bonds have
about held their own. The dollar is
sues traded on the New York Stock
Exchange are only point or so
below the highs of the year and they
still Weld something like 7i2 to 3
per cent. The market has been more
stable for those issues than in some
time and the same was true of Bel
gian bonds. The Italian per cent
dollar loan reflects in its market
price the general feeling of uncer-
tainty as to Italy's position.
Irregularities in Industrials.
In domestic industrials. there has
been a good deal of irregularity. In
dependent steel bonds have been firm
and some of them strong. OIL shares
have continued to drag. There Is
greater variation in this class, per
hapS than in any others and yields
obtainable range from less than TO
more than per cent. The StatiSti-
cal pOsition of the industry is en-
couraging. but its securities have not
responded thereto and this is just as
true of bonds as of stocks.
Sugar issues have done a little
better. These. too. sell on nigh
Weld basis rejecting the Improbable
character of production at present
priccs of raw sugar There has been
no Improvement in demand for Sc
c1rities of the soft coal or textile com
panies. the two other trades in which
depression has been severe. Public
utility bonds, on the other hand. are
still the favorites among investors
Study of a list of bonds which have
defaulted interest or principal or both
since October ! last. reveals some in
tereSting facts. There are 20 such
bonds which had a fairly wide public
distribution. OF this number 10 were
industrialS. We're fractions. either
urban or interurhan: were rail
roads and were foreign. There
were no electric light and power. gas
al