Evening star., 1926-04-25
WEEK SEES STEADY
& BOND LIST RISE
Climax, Friday, Followed Re.
discount Rate Cut-Buy-
ing Broadened.
RY GEORGE r. HUGHES.


Y SPECIAL Dispatch to The star.
NEW YORK. April 24.-This week
has seen steady advance in prices
Tor investment securities.
The climax came on Friday, the
first business day after the reduction
IN the rediSCOunt rate of the New
York Fcderal Reserve Bank from 4 to
-. per cent. The bond market bad
been forecasting this action on the
preceding day, but nevertheless the
sank and file of investors and traders
had not anticipated it. So il came
about that there was a rush to buy
nigh grade obligations Of all kinds,
beginning with L. s. Government
loans and then broadening out to cor
porate issues, chiefly rails.
Six Government loans made new
high records for 1926 Three of them
sold at the highest in their history.
These latter We're all Treasury loans,
which are of more recent date than
the Liberties and likewise of longer
term. The Liberties, however, were
I'll very strong and the volume of
trading was larger than it has been
in long time, The yield at this
weeks market is down around 3.75
and AROUND 3.65 per cent for the
longer.
T3X Exemption Loss.
on sIuly | all the Liberties except
the > i2s lost their tax exempt fea-
ture, save for q comparatively small
amount. Ii had been expected that
taxable Government bonds would lose
i'm attraCtiVeneSS compared with
tnunicipals as this date approached.
- now appears that falling interest
rates and an advancing bond market
@enerally are more influential in fix.
ing prices than any loss of tax eXemp
ton.
In view of the striking gains. the
: question arises whether Government
bonds have reached their peak prices.
Judging by postwar standards. the
return to the investor at the prevail
ing quotation seems low but the sup
ply is constantly diminishing under
Treasury refundinE operations, and in
normal times a 31a per cent or even
q , per cent yield on United States
Government obligations would not be
surprising. The immediate future
depends primarily on the money mar
hct.
Just now not only banks and finan-
Cial institutions, but industrial. utility
and railway corporations are in such
strong Treasury position that they
have surplus funds to employ, and
the natural medium in such cases is
a Government bond. Illustrative of
this excessive supply of money is the
fact that this week one of the pros
porous railroads. which has a bond
issue maturing next March. was buy
ing up the bonds in the open market
in effect anticipating the maturity.
: No Trend to Higher Money Rates.
So far there is no sign of any trend
toward higher rates for money. Botn
time and call funds this week fell II
the low of the year, While the reserve
ratios of the Federal Reserve system
as a whole and of the New York Bank
alone We're higher than at any tine
since January l. There has been no
drain upon the gold supply. the eX
rorts to Canada not being sufficiently
large to be of any significance. 1t Is
possible that the fall in interest rates
IN New York will result in the trans
fer of balances to London. That
might cOnceNably stiffen rates here,
but there was no lack of confidence
ON the money account in the bond
buying of the week.
The advance in the high-grade rail
, road bonds which was a feature of the
weeks trading. second in prominence
only to the gains in the Liberties,
was also helped along by the dearth
of new offerings in this field. Aside
from equipment trust certificates.
ebout the only new issue for railroad
account that qualified as a legal in
NeStment was the some SlS,O00,000
chicago and Northwestern general
mortgage bonds sold in the midWeek
ON n 5-8 per cent basis. The coupon
rate was 434 per cent and the offer
ing was quickly disposed Of. In gen
eral. however, there has been little
or no competition with the seasoned
1Irst mortgage railroad bonds.
Utility Issues Accumulated.
With the utilities of similar grade
the situation is a little different. In
authorization of the enactment into
law of the bill to make electric light
and power and gas bonds legal in
Iestments in New York State, many
tuf these issues had been accumu-
lated by dealers. When the news
came late in the week that this bill
had been killed, there was an imme-
diate reflection in the market for
these utility loans. Any such soft
ening is likely to be temporary be-
cause the insurance companies are
constant buyers of these issues and
even at present high prices they re-
turn more than do the corresponding
railroad bonds.
Strength in the market this week
WAS not confined to the high-grade
group. There was active buying of
the junior rails at advancing prices
and a constant search for bonds sell
ing out of line. Speculation was
active in the lower grade. notably in
the New York City traction obfiga-
lions Sooner or later an advance in
the high grade group always broadens
ont TO include the second-class and
speculative descriptions.
Meanwhile, as far as attractive re-
turns and comparative safety go. the
foreign bonds, especially the South
American, carry the most convincing
ppeal. New South American offer
lngs this week have been exception
ally we'll taken. on one of them, the
new Uruguay skies, subscribers were
allotted only one-third of the num-
Der of bonds applied for