Evening star., 1926-05-02
WEEK Of STRENGTH
IN BOND MARKET
French Dollar Securities Are
Feature of LiSt-Hold
Remarkably Steady.
BY GEORGE II. HUGHES.


Special Dispatch 10 The Star.
NEW YORK, May 1.-The invest
ment market has had another week OF
pronounced strength, although interest
has been diverted from the strictly
gh-grade group, such as United
states Government bonds and the
first mortgage railway obligations, to
securities giving a higher yield and
10 new offerings. The most important
development of the week, however
was the conclusion of a debt-refundlng
agreement between the United States
and France. In the last few days at
tcntion was centered on the foreign
list on this account.
French dollar bonds, which at cur
rent prices yield 712 and S per cent
have been remarkably steady all year,
considering the persistent decline OF
the French franc and the accumulat-
ing peSSimiSm about French finances.
From time to time they have yielded,
but never in proportion to the weak
ness of the frame.
OF course, theoretically. as dollar
bonds. they are not directly affected
by fluctuations in the franc. Still. a
larger range between the high and
the low would not have been surpris-
ing Particularly in the week just
past. while the franc was making new
rccord lows for all time almost daily,
was the StcadineSS in the French dol
lar bonds conspicuous. When the
news came of the agreement at Wash
lngton, French bonds turned upward
and some of them, notably the IS and
the Ss. reached new tops for 1925. All
l1a {1S J1n ho1 8 Cf
the temporary independence of the
bonds from the franc was clearly in
6iCated.
Many Factors i'm Situation.
Permanent improvement Of the mar
ket for French bonds depends upon
many other things than any tentative
settlement of the war debt. That is
good as far as it goes indicating as it
does the purpose of the French peo-
ple to meet their obligations to the
American Government. That they in
TEND to care for their Indebtedness to
private investors in America may be
taken for granted.
Some people believe that all the
European borrowers will put service
on private loans ahead of that on in
ter-government borrowings. That
theory has been advanced recently
with regard to status of the German
external loans in relation to repara-
tions payments. 1t does improve
French credit in American eyes TO
have the war debt obligation recog-
nized. What is not changed, however,
is the French internal financial situa-
tion. That remains as dubious as ever.
NVitness the failure Of the exchanges
RIO reflect the signing of the agreement
ct Washington.
Meanwhile, sentiment toward South
American investments continues 10 pc.
come more favorable. Practically all
the loans f1oated recently for account
of countries and municipalities in the
continent to the south have been over
subscribed and actually placed to
great extent in the hands OF perma'
nent investors. A good many or these
issues are selling at premiums over
the offering prices. This gratifying
condition could easily be altered py an
over sllpply of new bonds, but so 1ar
,ha market has been able to absorb
The output as 1t came along.
Advance Not So Uniform.
In the general market. high-grade
domestic issues have held firms but
advances have not been so UNIFORM
as earlier in the upward movement.
Rather there has been a search Tor
issues selling out of line and to some
degree a turning to the higher ylelo-
ing grades. The remarkable feature
sis the small response made by junior
railway bonds to the highly encourag-
ing March traffic statements. The
comparison in earnings between
March this year and March, 1928, mas
been so striking that decided gains IN
those railway securities which or
dinarily f1uctuate marketWise Win
changes in the financial condition or
the roads concerned would naturally
have been expected. Little OF the
kind has happened, however.
The fact is that the investment COM
rn1lnity is in a very conservative state
Of mind. Eventually strength IN high-
est grade bonds widens out until at
last it reaches the speculative section.
The movement has not yet gone that
far in this instance.
Money Has Not Changed.
Fundamentally. the money market
has not changed during the week.
There has been the usual hardening
that precedes the end of the month,
but this is only temporary. Time
funds are obtainable at practically the
low of the year. Discount holdings
of the New York Federal Reserve
Rank have increased as the result
of the cut in the rate from 4 to 31a
per cent and the reserve ratio is down
substantially from that of the pre-
ceding week, but still above what it
was a year ago.
There is no change in the outlook
for the bond market which still is
highly favorable. Neither in money
nor IN commodity prices are there
Indications of anything that would
reverse the trend toward higher
prices for prime investment securities.
Failing off in speculation in stocks
works all to the advantage of sound
bonds. Judged by the standards of
the past five years. prices look high.
But compared with prewar levels,