Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-02-21
ANOTHER NEW PEAK
IN BOND AVERAGES
Banks Leading Buyers in
Present Market-Gains in.
Foreign Group.
BY GEORGE T. HUGHES.

BY GEORGE T. HUGHES.
Special Dispatch to The Star
NEW YORK, February 20
Further progress has been made this
week in the advance which has been
under way in the bond market. and
the average now stands at another
new high since 1917.
The consistency of the rise is its
impressive feature, going on as 1t has
done now without important setback
for more than a month, undisturhed
! either by the vagaries Of stock specu-
latton or by minor fluctuations in
money.
While all grades Of bonds have par
ticipated in the movement, in one re-
spect the buying this week has been
different from that earlier in the
month. The feature this week has
been the high-grade railway issues
in the legal investment class. the kind
that the law allows savings banks to
buy In New York State.
Banks Enter Market.
Up TO about the middle of this week
there had been what amounted TO "A
deadlock between holders OF these
bonds and potential purchasers. Prices
for the sales recorded on the exchange
had ranged around the high points in
recent months, but transactions were
on small scale. because the owners
would not shade prices and buyers
refused to raise their bids. on Thurs
day, however. this situation changed.
when suddenly certain banks and
dealers entered the market and
cleaned up the available supply Of
those high grade bonds a the offered
prices. All this business was done
in overt he country trading. Suhse-
Quent sales Of odd lots were made on
the exchange at prices higher than
the large blocks had changed hands
outside.
Buying Very Heavy.
Transactions in selected issues of
this type ran as high as from $500
600 to 81 100000 par value, and in
some cases even higher. Some of the
buying WAS doubtless for account OF
savings banks which intended to hold
the bonds for permanent investment.
but more of ii came from middlemen
who We're anticipating the development
Of demand from the savings banks.
The theory was that soon or later
these institutions would be forced into
the market and that they would have
to pay the seller price to fill their
requirements. Whether this theory is
correct, only time can tell. but II does
seem that even a legal" bond on a
4 80 per cent basis is hardly a bar
gain.
Should the New York Legislature
enact the proposed law making legal
investments public utility bonds which
pass certain tests, the prevailing yield
on the railroad bonds will look still
less attractive. for. earnings A nd prop
ertE values considered, there are plenty
or utility issues just as high grade in
VestmentS as are the corresponding
rails. and the price of the utilities is
much lower.
New Bonds Quickly Taken.
True. there has been some advance
In the utility group. but il has not by
any means discounted the effect of
this contemplated change in the law
The action of New York State in this
matter is important because New
York is the largest field for the sale
of legal bonds and because the New
York State law has been more rigid
than that of most other States.
Another interesting feature of the
week was the prompt sale of $1,000
600 City of New York Az per cent
bonds and corporate stock at prices
TO yield from 3.75 to Ais per cent. The
success of this offering shows that
the market for taX-exempt securities
has not been unfavorably affected by
prospective reduction In surtaxes.
The issue was more than nine times
oversuhscrih"d and was the largest
sale of its kind in the history of the
city. Buying orders for the bonds
after they had been placed on sale by
the successful syndicate came from all
parts of the country. Demand was
stimulated by the same factors that
were influential in bringing about the
higher prices for the tax-exempt Lib
erty 3l2s. namely, the preceding scar
city in municipal and state offerings
and the fact that the limited tax ex-
enlption applying to other Liberty
bonds terminates on July l.
Another Offering Also Sold.
Testimony TO the underlying
strength of the investment market
was also afforded by the offering and
sale Of the $50, 900 900 General Motors
Acceptance Corpora ton 3 per cent
serial notes at prices to yield from 5
to bIa per cent. according to ma
turity. It was also a striking com
mentary on the growth of the bust
ness of financing the sale Of motor
cars.
In the higher Welding section Of
the list buying has shifted about from
one issue to another and from one
group TO another. There has been q
little better market for issues selling
at premium, especially the second
grade railroad bonds with per cent
coupons. In the foreign department
several new high prices have been
made by South American bonds
French obligations have held their
ground remarkably well, considering
the extreme weakness in franc ex-
change.
It was interesting to note that for
the year to date the range between
the high and the low for French rs
has been only 90 points, for French
'7i2s it has been y. points and for
French IS. 27s points. This represents
slrprising liability