Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-12-26
HALT TEMPORARY
|NBOND MARKET
ReinveStment Demand After
]. First of Year Sure to
Bolster Prices.
BY GEORGE T. HUGHES.

b1 UEUktUE Il. nGOkhED'
Special Dispatch TO The Star.
NEW YORK, December 25.-.The
bond market quoted down this week
after its prolonged period of strength
and activity. For most of the recently
active issues prices were shade
lower. but there was no pressure to
sell and no indication that the main
advance had been permanently halted.
The fact is that the reinvestrnent
demand for bonds, traditional about
this time of the year, had been antici'
pated earlier in the month and the
buying that went on this week for
this account was mostly In htgh-grade
stocks, chiefly railroads. but some in
dustrials. Returns on bonds. even at
present high prices, compare favor
ably with those of the strongest cor.
porations, but the latter are more pop
ular Just now. The action of the
United States Steel directors in declar.
ing q 40 per cent stock dividend has
encouraged the belief that there will
be more disbursements Of this char
acter by other corporations. So, for
the moment, investment sentiment
gives the preference TO stocks rather
than to bonds.
Support for the bond market will
come later on from the banks as funds
accumulate with the lessened demand
from business usual at this season.
In whatever way it is employed, the
amount to be reinvested after the
first of the year will be larger than
ever before. 1t is estimated that the
January l dividend and interest dis
bursements will approach the huge
sum of $3.50, 0o0. 900. compared with
about 1912, 100000 a year ago.
Call Money Higher.
Hardening in the rates for call
money, which went to 6 per cent at
the close of the week. the highest in
: three months, might have had some
thing to do with the reaction in bonds.
but 1t is hardly likely, for it indicated
no real change in the credit situation.
AS far as bonds are concerned, the
significant thing is the decline in COM
mercial loans and the increase in in
vestments revealed in the last state
ment of the reporting member banks
Of the Federal Reserve system. Com
mercial loans for the week ended De-
cember Is, representing the latest
available returns, dropped $40, 000, 900,
against an increase for the year of
1875, 900. 600. while at the same time
investments in securities other than
obligations of the United States were
up $29 ,0o0, 900 on the week and $27l,-
o00, 900 for the year.
1t remains to be seen how much of
drain upon the money supply the
renewed activity in stocks will cause.
However that may be, the commodity
markets are using a minimum Of
credit just now. and there ought to
be enough to go around unless new
security offerings next month are in
much greater volume than now ap-
pears probable.
Such activity in bonds as there was
this week centered about the higher
Welding descriptions. It is an inter-
esting fact that throughout the en-
tire year the highest grade of invest
ment bonds Of the corporate class
have not appreciated in the same de-
gree as those of the lower investment
status. This is certainly true of rail-
road bonds, If not of utilities. The
spread between the first and the sec.
ond grade rails has steadily narrowed,
and now interest has shifted to obliga-
tons frankly speculative.
Might Change Suddenly.
If there should be any substantial
falling off in earnings, this condition
might change rather suddenly. The
Union Pacific reports this week may
not be typical. but car loadings have
been held at their record high almost
solely because coal has been moving
In such volume. Sooner or later, Of
course, there will be a decrease in
traffic and some less favorable COM
parsons in railway income statements,
and then the better railway bonds
may again come into favor. The point
Is that, assuming. as II seems reason
able TO do, that the advance in the
bond market is to be carried farther,
1t does not follow that speculative
and investment descriptions will keep
on moving up together.
II there Is any setback in domestic
trade sufficient to influence the price
OF securities dependent upon earnings,
one result will be increased interest in
foreign government obligations. In
this quarter the only factors that will
govern quotations will be the price of
money and the progress, or lack of It,
In financial rehabilitation abroad.
French Bonds Interesting
The case Of French dollar bonds is
the most interesting. All the active
issues listed on the New York Stock
Exchange closed the week Just below
the best OF the year and not far from
the best for all time. French bonds
are not limited in possibility Of ap.
pISNlAtlOIl ny
as are the popular German issues,
many OF which are now selling only
a few points below the figure at which
they may be retired. One French
bond, the 7i5s of 1871, are non-callable
prior TO maturity.
Meanwhile French francs have sold
above cents and at a new high for
the year. and the Government has
announced that it has acquired the
exchange necessary to meet all pay
ments on external obligations for a
year or more to come. All this has
been accomplished without any action
having been taken on the debt refund
} ing agreement with the United States.
The most Interesting new Offering
of the week was the Bulgarian settle.
ment loan. The amount was compare
lively small. but the price was attrac-
tive and the bonds met q favorable
reception. The financial guardianship
which has been established by the
League Of Nations over the tangled
affairs Of the countries of central and
eastern Europe has proved one Of its
most successful undertakings. The
outstanding incident is Austria. 1t Is
this sponsorship that inspires conf
dence in these apparently highly spec.
ulative bonds.