Evening star., 1926-04-11
BOND LIST REACHES
, TOP LEVEL OF 1926
Fundamental Conditions Fa.
vor Continued Strength
for Investments.
BY GEORGE #. HUGHES.

III UEIUnUE Il. III OInES.
Special Dispatch to The Star.
NEW YORK, April 10.--At no time
this year has the investment market
been so strong as it was this week.
At no time has there been such i'm
pressive buying of high-g bonds
The upward trend was in evidence
all the week, but it gathered momen-
tum at the end, when not only the so
called legal bonds, but sound invest
ment issues which do not qualify
technically as savings bank holdings,
Joined in the advance.
Even some of the foreign obliga-
tionS, about the security of which
there is no reasonable doubt. were in
active demand. The line was drawn
only at the point where the specula-
tive feature was involved.
The scope of the movement may be
better understood if a few examples
are used. Take three bonds which
made new 1926 high records this
week--Atchison general As, st. Louis
San Francisco prior lien "A" As and
Commonwealth of Australia 5s.
Highest Degree of Security.
The Atchison issue represents the
highest degree of security available
II
monty considered the leader in its
group. 1t is a legal investment for
savings banks in practically all the
States. 1t sells a yield well under liz
per cent. Fluctuations in its market
pr.ce are governed entirely by the
current charge for money and the
outlook for commodity prices, and not
by the prevailing trend in the earn
ingS of the Atchison Railroad. Bonds
OF this type are always the first to
respond in a generally advancing mar
ket.
The St. Louis,San Francisco obliga-
tion is in quite different class. The
bond is we'll secured by property
value. but it is only in recent years
that earnings have become stabilized
at a sufficiently wide margin over
fixed charges to satisfy the require
ments of eXacting bond buyers. 1t is
only within a comparatively short time
that the common stock has been put
upon a dividend basis. In other words,
this bond is the obligation of a cor
poration with an improving financial
outlook. which gives every promise of
being permanent.
The Australian bond ranks high
among foreign loans. The market rates
II inferior only to Dominion of Can
ada and United Kingdom obligations.
But interest and principal on an
Australian bond are for ali practical
purposes just as well assured as they
are on the obliga tionS Of either of the
other two countries. Moreover. the
Australian issue carries per cent
coupon and sells below par. and ) per
cent bonds below par as secure as
these are no longer plentiful.
Not of Speculative Nature.
1t will be observed that there is
nothing of speculative nature about
either of these three issues. IT is true
that a good deal of the buying this
week probably came from dealers who
expect to retail the bonds later to
individual investors, but this does not
take away any of the significance.
It is hazardous to forecast how far
any such movement as this will go.
but at least it can be said that all fun. |
damental conditions favor continued
strength in pure investments.
The downward trend in commodity /
prices has been emphasized in this
in previous letters. |
This week the influence which was |
most potent was the fall in rates for |
time money to the lowest since last |
Autumn. Probably a contributing
factor was the let-up in stock specu- !
lation and the diversion of funds from
hat market TO investment bonds. A
change is possible in any of these |
quarters, or all of them, but at pres |
ent it looks unlikely. Then. too. there !
Is always the theoretical argument in |
favor of a long time advance in |
bonds founded on the historical prece- |
dent of what has always happened |
after great wars.
In the field of foreign affairs, the |
most interesting development of the |
week has been the statement of the |
American section of the International |
Chamber of Commerce on the situa |
ton in Germany as it affects the .pri- |
Nate dollar loans tloated in the |
United States. 1t is estimated Amer |
lean investors have absorbed in the |
last year or SO about $230,000, 900 in /
German corporate and government |
offerings. The question is now raised |
formally, as it has been casually for |
months past, how the exchange is to |
be secured for the service of these !
loans.
Associated Electric Issue.
The problem will not become press !
ing until 1928 or 1929. when the Ger |
man balance of international pay |
lments under the Dawes plan reaches /
I he ma Ximum. The market tor Ger |
man dollar bonds paid no attention to !
this analysis and. as "a matter of fact, |
the economic situation in Germany in |
recent months has shown marked i'm |
provement. The chances are that |
long before the time comes this diff |
Guilty will have been surmounted.
Two pieces of new financing this |
week have commanded unusual at !
tention One WAS the sale of $25,000,- |
600 City of Philadelphia Municipal |
bonds priced TO yield the investor |
4.1I5 per cent. This is slightly high |
er than the $75.000.000 New York |
City issue retired in February. but it |
is favorable enough to the borrower |
10 Indicate the strength of the muni- |
cipaI bond market. even under the !
reduced SurtaXeS. |
The other was the So 900 900 AS |
sociated Electric 5l2s, which was the |
largest electric light and power bond |
issue on record. Aside from it's size, |
the feature about this offering was
the progress it showed toward a sim
plifying of the financial structure of
large holding companies.