Evening star., 1926-03-21
BOND LIST AIDED
BY MONEY TREND
Most Observers Don't Think
Market Will Be Hurt by
. Stock Slump.
BY GEORGE T. HUGHES.
Special Dispatch 10 The Star.

b1 UEOhUE Il. HCIHES.
Special Dispatch TO The Star.
NEW YORK, March 20.-The ques
ton which interests the investment
market more than anything else JUS
now is how far the collapse of the
speculative campaign in stocks will
AFFECT bonds of the strictly investment
type.
There are two opinions about the
matter. One side holds that the dowr
turn in the stock market will have
an unfavorable influence upon bonds
The argument is that any such strik
ing reversal of sentiment as has beer
seen In the stock market during the
past week or two will impair conf
dence in the maintenance of the pres
ent price level for bonds.
The other view, and those who hold
1t are in the large majority. is that,
except for temporary depression.
the bond market will go ahead just
as If there had been no upset in
stocks
Money Prices Factor.
In support of this second opinion
the fundamental facts as to money
and commodity prices are advanced.
1t was not tight money or the threat
Of tight money which brought about
the change of front in the stock
market. In fact, money this week
has been distinctly easier, not only
iay-to-day loans on the Stock Ex-
change, but accommodation for fixed
periods. 1t seems reasonable to eX-
pect that this condition will be ac-
centuated by the release of money
hitherto employed for speculative
purposes, not only in stocks but in
real estate.
The decline in the amount employed
in brokers' loans as revealed in the
figures published Friday emphasizes
the point as TO the stock specula-
ton. For real estate there are no
statistics comparable. but the best
opinion is that the fever there, too,
has ahated.
Nor does it appear probable now
that there will be any demand upon
the money supply from commercial
interests that cannot easily be met.
Business activity. as testified to by car
loadings and other indicia generally
relied upon. is continuing at a high
rate but gives no signs of a boom.
commodity prices also persistently re-
fuse to advance. 1t is hard to see
where any extraordinary drain upon
money resources is to come from.
That being the case. there can be no
disturbance to bond prices from these
quarters.
Government Loan.
On the other hand, the money re-
leased from other uses must so some
where and the natural recourse is TO
bonds, especially those about the quail
ity of which no question is possible
1t was perhaps upon this theory that
Secretary Mellon acted when he
offered a 1ong-term Government bond
issue at the lowest coupon rate since
the war. Evidently the Secretary be.
lieved that the let-up in stock specu.
lation would increase the appetite for
securities and. Judging by
the reception the new Government
loan had, he was right.
AS far as the market itself went
this week, there was a recession in
prices for all grades of securities Just
below the best. Demand continued
for the first mortgage
Electric Light and Power issues sell
Ing around a per cent basis or even
less. 1t was helped somewhat by the
prospect of such of these bonds as
could pass the requirements becoming
legal Investments fo~ savings banks in
New York State, but it did not rest
upon that alone. The insurance COM
panies and individual investors of
large means are looking for just this
type of bond. To a less degree the
same was true of the very high grade
railroad obligations. The difficulty in
both instances was TO get offerings of
large blocks.
Market Sold Of.
Except for these very high grade
Issues, however. the bond market
sold off more or less in sympathy
with stocks. Semf-speculative rail-
road issues We're especially heavy.
There was further liquidation of the
obligations of some of the railroads
operating In the South. The raising
of the dividends on Chesapeake and
Ohio common and on Missouri Kan
sas-TeXaS preferred stock was with
out stimulating effect. Merger re-
ports as basis for advancing bond
prices were no longer effective. Sec
ond grade utility issues suffered
along with the rails, and some of
them are now down where the re-
turn is again attractive on a Weld
basis. The market, however. was in
a mood to accept nothing save the
o-called gilt-edge descriptions.
In another quarter bonds have re-
fected the news of the week. That
Is in the foreign group. There is no
denying that developments on the
other side have been disturbing to
American investors in foreign secu-
rites. First. there was the slump
in Belgian exchange which showed
Itself In the market for Belgian dol
lar bonds and then there was the
fiascO at Geneva which temporarily.
at least, weakened confidence in the
whole European situation.
1t must not be understood from
this that there was any material set
back in the prices of seasoned foreign
bonds, but only that sentiment to-
ward them was less favorably dis
posed.
The market will not be really
tested until some new large Euro
pean offering is presented. South
issues were better support
ed. Still, what the investor wants
Just now is a high grade domestic
issue rather than a foreign obliga-
tion of any kind. That may be only
a passing phase. but it must be
reckoned with.