Evening star., 1926-05-09
BONDS STRENGTH
Barred BY STRIKE
Demand for High-grade Is.
sues Not Checked by
Crisis in England.
by GEORGE r. HUGHES.


6pecial Dispatch 10 The star.
NEW YORK. May S.-The new fac
tor which entered into the investment
situation this week was the great Brit
iSh strike. 1t had two effects. The
first was a weakening in the market
for foreign dollar bonds. The second
was Il holding up of new financing
pending the outcome.
Tho strike did not check the de
inand fer high grade domestic securi
ties. III fact, ii anything, that de
>nand appeared all the stronger. A
let-up in desirable new offerings sim
ply turned into the market for sea
soned issues the large inquiry from
banks, financial institutions and in
dividual investors who have surplus
funds that they must employ.
True, trading queted down at times
but there was no falling off in prices
and whenever large blocks were avail
able in anything of merit they were
quickly absorbed. Dealers continued
10 complain that they could not get
enough of old,linc seasoned underly'
Ing issues to supply their customers.
Strength Is Barred.
III short, the test of the bond mar
ket afforded by the British situation
only went 10 reveal its great inherent
strength. Probably if the labor trou'
bleS on the other side are settled sat
lsfactorilY, the market will increase
i'll activity. but it could hardly give
more convincing proof of its charac-
ter than IL has done in the past six
days.
As for the foreign dollar bonds,
naturally enough they reacted to the
news from abroad. Losses, how
ever, We're comparatively unimpor-
tant. United Kingdom 5i2s OF 1887.
the premier British investment bond
traded in here. dipped to a new 1925
low. but that represented in figures a
loss of only n small fraction.
Even the French and Belgian dol
lar obligations, always fluctuating
over Il wider range than the British,
We're responsive only in small degree
10 the extraordinary slump in their
respective exchanges. When the
French and Belgian francs began to
break early in the week, the Belgian
bonds sold off more easily than the
French, but not enough to indicate
any important liquidation.
French Not Ready.
1t is just as hard to trace the con-
tlection between the events in Europe
and the action Of the foreign bond
market as it is to show that between
the collapse ilI the exchanges of
France and Belgium and the British
situation. About all that can be said
is that the on" reacted upon the
other in both instances. The dis
Iurbances in England certainly have
no direct hearing upon the French or
Belgian financial problem, which re-
mains an internal affair with both
countries.
At this distance the only solution,
so far as France is concerned, would
seem to be Il horizontal cut in the
interest rate on the French internal
debt. That would be hard medicine
TO take, and probably the French are
not Yet ready for it.
So tar the American market for
the French dollar bonds indicates the
belief on the part of investors and
traders that no matter what strong
measures are necessary to save the
Ircnch internal situation, there will
be no tamperlng with external obliga-
tions. On that assumption the com
paratlNo Indifference Of French and
Belgian dollar bonds to falling eX-
changes becomes understandable.
Curemitting Search On.
la The domestic market, the search
ior issues SeIlIns out of line goes on
OAA SAIIi tt4liSIH. -! tIIG HlOllCHl, tue
bonds Of the very highest grade, the
first mortgage savings bank legal
type, are stationary. although one or
Two have made new tops during the
week, as Union Pacific first Is,
which sold higher on friday than at
any time since l3-2. United States
Government Obligations remain
around their record high prices.
Further advance would bring down
the yield obtalnable on this class of
Investments. already very low, below
the views of all but those institutional
and individual investors who are re-
stricted by law as TO the character Of
their holdings. But in the market
for bonds To return from 10 512
per cent. first one issue and then
another creeps gradually upward.
More and more buyers are scanning
redemption provisions. If the trend
in bonds is 10 continue upward the
point of resistance for specific issues
viii be the calIable price. For a time
a bond may sell Il point or two above
that figure, but it can hardly so much
further when there is SO great a
supply of money availab for refund
ing operations.
Bonds Held Back.
II is this condition which holds
back good many Of the premium
bonds and turns attention to those
no better secured. but which are not
limited in possibilities of price APP
probation by redemption provision.
Supposing the demand keeps up,
iilc next development logically would
be for it to spread to investment
stocks. Something of Inc kind has
already happened in the most con-
nerVative preferred issues. but there
mas been no indication of it in the
nigh grade common stocks, either rail
way or industrial. vet with certain of
The railway seasoned dividend payers
ala to "a per cent is to be had at
present prices with practically as good
assurance Of continuity of income as
in many bonds and with an oppor-
tunity for profit on the capital EN-
ployed, which the bonds do not offer.