Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-03-14
j. s. ISSUE IS BOND
! FEATURE OF WEEK
Continuation of Heavy Invest
ment Demand Seen by
Bankers.
ny GEORGE T. HUGHES
Dispatch TO The Star.

by GEORGE T. HUGHES.
Special Dispatch TO The Star
NEW YORK, March 10. - The
event of the week in the investment
market was the Offering by the Sec
rotary of the Treasury of a long term
Government bond issue with the low
est coupon rate since the war.
There have been numerous in
stances of Treasury financing on a
lower yield basis to the investor in
the past two or three years, but these
were all with securities of short ma
turtles. The new bonds, carrying a
S2 per cent coupon and maturing IN
80 years, but redeemable in 20, rep
resent a lower cost to the Govern
ment than anything since the first
Liberty loan, except these short-term
obligations referred to.
That the Secretary should have Sc
lected this time for long term Of
fering when the stock market had
Just experienced a sharp relapse ana
when bond prices had been depressed
In sympathy with the speculative col
Npse was n surprise to Wall Street,
nut the soundness of Mr.. Melons
judgment was demonstrated by the
prompt transcription.
May Eventually Appear High.
To investors accustomed to present
day bond Yields, a 334 per cent issue,
even a Government obligation. might
at first sight look unattractive. But
the market did not take it that way
and it may we'll be that long before
the maturity of the new bonds IL 3ai
per cent return on a Government ob-
legation will look high.
It is not the temporary f1uctua-
tons in the money market or the i'm
mediate outlook that signifies. but the
long term trend.
Perhaps we shall again see the
time when the per cent first mort
gage bonds of the most prosperous
railroads sell at par or even when
per cent issues. The New York Cen
trail did that in 1897 ard 1895.
Illinois Central did it in 1897. In
1899 the Chicago and Alton. now in
receiverShip, f1oated a mortgage bond
with a 3 per cent coupon.
Since the beginning of the present
century interest rates have been grad
ually rising. but there are many au-
thorities who believe that the move
ment has now been reversed and that
the peak was reached in 1921. 1t is
hppraiSing the attractiveneSs of the
new Government bonds.
Aids Entire List.
The confidence in the market dis
played by the Secretary of the Treas
ury found immediate reflection in a
hardening of prices throughout the
entire list. Activity increa sed and
some issues in the grades Just below
the best advanced substantially. At
the close of the week the averages
were higher than at any previous time
during the month.
Well informed bankers predict
continuation of heavy investment de-
mand. and there is no present sign of
any excess of new issues with which
to supply this demand. AS a matter
Of fact, new financing this year so far
has not been relatively large.
During the first two months of 1926
the total amount Of new bonds of
fered was IS4S.507.6 95, which com
pares with 1888 100000 for the same
period in 1925. There are no large
pieces of railroad financing in sight
and most industrial corporations are
In an extraordinarily strong position.
Moreover, the supply of United States
Government obligations is slowly but
steadily decreasing. Meanwhile, the
savings banks and insurance compa-
MES are steady customers for bonds.
More Foreign Issues.
This country probably will have to
absorb good many more foreign
offerings. but even here the flow is
being slowed up by the fact that
some of the best credit risks among
foreign governments are able to
supply their needs in their home
markets.
This Is the case of Japan. for
instance. where several pieces of new
business have been underwritten by
home bankers instead of coming to
London or New York as had been
expected.
Belgium will doubtless be a bor- |
rover in the near future, the amount |
of the loan being divided between the |
British and the American markets. |
There are several new South Amer |
lean bond issues in sight, one of |
them loan to the state of Sac |
Paulo, Brazil. which will also. it is |
expected, be a joint London and New |
York affair. 1t will be remembered |
that objection from Washington |
stopped the placing In America of !
Sac Paulo coffee loan. but that does |
not prevent credit extension which Is |
not based on maintaining the price |
OF commodity. the import of which |
is essential to American consumers |
Quotations for listed foreign bonds |
have not improved proportionately |
with domestic issues. but considering |
all the uncertainties of the situation |
in Europe prices have held remark |
ably well. Proof of this statement |
may be had in the fact that the |
active French bonds have had a price |
range of the year to date of less
than three points.
Larger Risk Today.
In part. at least, this relative sta
bility In foreign bonds is explainable
by the advance in the domestic list.
Eight per cent on a foreign bond rep
resents larger risk today than the
same return did two or three years
ago, because in the meantime the gen
eral level of bond prices has been
working upward.
In other words. those investors who
are willing to take some sort of a
chance for the sake of a larger return
have been forced to turn their atten-
ton to the foreign descriptions. Some
thing of the same condition is appar-
ent in certain semi-speculative domes-
tic issues.
Take the bonds of the sugar pro-
ducing companies, for instance. The
industry has been suffering from over
production for year or more. There
is still an apparent surplus of sugar,
and the profits of the Cuban COM
panies, at any rate. do not appear
promising. Nevertheless, one of the
outstanding features of the market
this week has been the firmness in
sugar bonds.
Shakespeare in Siam.