Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-01-31
new HIGH LEVELS
NL|BERTY BONDS
Increased Demand for U. S,
Liens Indicates Easy Money
Rates for Some.
BY George T. Hughes

BY George T. Hughes
Special Dispatch to The Star.
NEW YORK, January 30.-Again
this week the record of the invest
naent market has been one of slow
but steady and impressive advances.
The average price of domestic bonds
10 at another new high, unequaled
Sfnce 1917.
An incident of unusual interest
was the renewed inquiry for United
states Government obligations, re-
sulting in new high quotations for
the year for three or four of the
active issues. In this case the buy
ers are principally, if not entirely.
banks, but the movement Is signiti-
cant of an excessive supply of money
seeking temporary employment. The
most important Wall Street house
specializing in Government bonds eX-
presses the opinion that the advance
In libertys is likely to go on for
three or four months, the INFER
ence being that the ease in money
will continue at least that long.
Money Trend Downward.
Just as the trend in bonds has been
upward, so the tendency In money
has been downward. There has been
an appTcCldDlS NltlulllG III the tlidi SeS
for time funds of all maturitieS and
until the last Of the week, day-to-day
money on the stock exchange did not
deyiate from per cent, the low
of the month. Money conditions are
reflected IN the higher reserve ratio
Of the Federal Reserve Banks as
whole and OF the New York Federal
Reserve Bank in particular. The
New York Banks 86.I per cent ratio
xf-ir n
cent in the same week Il year ago.
It Is reasonable to expect as Spring
approaches an increasing demand
for money from business which
would naturally bring about a harden
ing of rates. Nevertheless, there IS
no sign of imitation in commodities.
In fact, outside of the security mar
kets prices obstinately refused to ad-
vance This is true of steel, 1t Is
certainly true of copper and while
some foodstuffs are moderately higher
the general level is unchanged. And
commodity prices are just az much
q factor in influencing bonds as is
money.
Offering At Discount.
Illustrating the more favorable
terms upon which corporations of
established credit are able to do
financing Is the offering this week of
SIS, O00 900 of Commonwealth Edison
bonds with Il Az per cent coupon.
The Offering price was at substan-
tiaI discount, but the interesting
thing IS that this is the first time
since the war that utility has mar
keted a bond with SO low a coupon.
In part, this is due to the advance
the utilities have made In gaining
the public confidence. but, in part,
il is due to the general investment
situation. 1t will doubtless be a long
time before and 31a per cent bonds
are put out by railroads as they used
to be a quarter of a century ago, but
it is not impossible that this day Will
again return some time. The one
respect in which fundamental condi-
lions differ now from then IS in the
income tax.
New Financial Move.
In connection with utility securities
demand for the high grade electric
light and power and telephone bonds
this week was stimulated by the
movement to make these securities,
under certain restrictions, legal in
vestments for savings banks in New
York State Aside from this the fed-
ture of the market has been the
search on the part of individual buy
ers for discount bonds selling out OF
line.
In this group the improvement has
been more marked than in any other,
but as soon as bond crosses par and
sells at a premium the demand slack
ems. To an institution premium
bond Is just as desirable as discount
bond, the yield being equal but to the
individual investor the necessity of
amortization is an obstacle.
Denosits Growing Steadily,
Bearing upon the demand for bonds
are the statistics showing the growth
of savings deposits, all of which even
tualIy go into bonds. The figures as
reported to the Federal Reserve
Board by s84 banks in selected cen
tiers throughout the country show
rise in these deposits during the cal
endar year 1925 from $685.. 2ll 900 to
S8,OS2,071 900. Despite installment
buying and record breaking specula-
ton, the country's savings continue to
accumulate. 1t is interesting to note
that the increase in the various Fed
eral Reserve districts was the largest
proportionately in the Dallas, the San
Francisco and the Richmond divi-
dends. The lowest increase was re-
ported by Kansas City.
A good deal has been said during
the week about the disadvantage to
the investor of stocks. common or pre-
ferred, which lack voting power. and
the New York Stock Exchange au.
thorities have taken notice of the crit
3cism in this connection and have in
dictated that they will sCrutinize care
fully applications for listings of new
stock issues in this category.
Demand Is Unchanged.
AS far as the preferred stocks are
concerned, the disadvantage, If 1t is a
disadvantage, is paid for in part by
the higher yield. Sometimes It has
been suggested that the bondholder
ought to have a voice in the manage
ment of the property on which he has
a lien. Generally, however. he frank
iy accepts this situation, contenting
himself with his position as creditor
as compared with the partnership
status OF the stakeholder. In any
event the demand for bonds shows no
indication of being affected by the al
legged superiority of common stocks
over the longer period
Copyright. 1920