Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-12-19
NEW HIGH MARKS
IN BOND MARKET
Gains in Foreign Groups
Draw Attention With French
Il. List Leaders.
BY GEORGE Il. HUGHES.
anal nisnatch tn ING SCR.

Special Dispatch to The Star.
NEW YORK, December 18.-The
bond market has had another week
of great activity and rising prices,
with the averages for domestic issues
reaching new high records since be-
fore the war and those for foreign is
sues touching record tops.
Probably the gains in the foreign
group We're the more interesting. The
leaders here were the French ohliga-
tions, which were bought in large vol
ume with apparently great confidence.
OF the three obligations of the French
government, one sold higher than ever
before since il was first issued and
two sold at the highest for 1926 and
only fractionally below the record
high.
The demonstration In French dollar
bonds might be explained by the In
creasing evidences of Improvement in
the French financial position, the rise
in the franc above the Accent level, the
reduction in outstanding note circu-
latiOn and the cutting OF the Bank OF
France discount rate. These are IN
deed impressive. but there is still the
matter Of French governments war
debt to the United States to be cared
for and there is doubt as to how
French business will react to the de-
lldLlOIl accompany illE tilC iEN ~ nv
franc.
Reservations Ignored.
These reservations have been ig-
nOred, however, and attention con
Centrated on the turn for the better
in the financial situation. Then, too,
the yield of French bonds at present
prices is evidently attracting more
and mode investment funds hitherto
content with domestic securities.
In a quiet way other foreign bonds
have been under accumulation. Some
of the Belgian issues have set up new
high marks this week, and the buying
in the German government Z per cent
loan has gone on regardless of the
fact that the current price is higher
than the redemption price. There is
no bar of this kind operating against
II further rise in the French loans.
In fact, one of them, French govern
ment 712s, is nOn-callable prior to
maturity in 1871. In this connection
1t is interesting to note that were
French 71as to sell on a basis equiva-
lent to that now prevailing for Ger
man government Is, the French issue
would have to go up some 6 points.
The week has witnessed a large
turnover in italian Is, but the price
Improvement has been only moderate,
There is a larger floating supply of
these bonds in Wall street than in
any foreign loan, and investors stress
more the possibility of Italy being de-,
prived of its present dictator than
they do the betterment of Italian
finances. The internal debt is being
reduced and surplus revenues are in
creasing. Real progress is being made
in Italy, but the market still balkS at
what might happen should the one
man on which it all seems to depend
be taken away.
Government Issues Strong.
Strength in United States Govern
ment securities has been the feature
Of the domestic Investment market.
One of the Treasury issues made
new high record this week and the
other two sold around their previous
highs. There has been more buying
also this week than in some time in
the Liberty list. Subscribers whose
allotments TO the new Treasury GER
tificates of Indebtedness were cut
down have evidently been turning to
the Libertys and principally to the
third 4t4 Lihertys, which is the
earliest maturity.
1t cannot be too often pointed out
that the supply of Government bonds
is constantly decreasing. Secretary
Mellon estimates that the public debt
will he cut down during the fiscal
year ending June 80 next nearly
81 900 ,000, 900, provided no new tax
legislation is enacted. Increasing de-
mand and a decreasing supply can
have but one effect, namely higher
prices.
The money outlook continues to
favor comparatively low rates. De
clineS in the reserve ratios of the
Federal Reserve Banks as whole
and of the New York Bank this week
are eXplainable as a direct result OF
the Treasury financing of the mid
month. More TO the point is the
latest statement Of the reporting mem
Der banks, Which shows a falling of
in loans and discounts and an increase
in investments After the first of the
wear it is predicted the banks will be
buyers of bonds even to a larger eX-
tent than now. There may be some
temporary fluctuations in money pend
ing arrangements of the January /
interest and dividend disbursements,
but that is of no significance.
Meanwhile for the IL completed
months of the calendar year, the
United States has had an excess OF
gold imports of SS7. 988.S29, against aD
excess of exports in the same period
of 1925 of S135.614,895. The next
change in the rediscount rate is almost
SIRE 10 he downward. The Federal
Reserve Board in its monthly bulletin
for December points out that money
is easier now than at any Christmas
time in two years past.
Just at the close OF the week inter
est in the bond market suffered by the
diversion of activity 10 stocks. Prob
ably also there has been some money
going into high grade investment
stocks which would otherwise have
gone into bonds. If. however, prices
OF stocks continue TO go up they will
lose their advantage over bonds in the
way of return. Falling off in earnings
would check the trend toward stocks.
It would operate more strongly
against industrials than against rails
or utilities The two last named
groups do relatively better in a period
Of falling commodity prices than the