Evening star., 1926-11-28
INVESTMENT BOND
LIST IS Stronger
Reception of Yokohama Is.
: sue Feature of Trading
During the Week.
BY GEORGE T. HUGHES
Spe aal Dispatch to The Star.


though interrupted by a holiday, buy
ing of investment securities for the
week was in large volume and at
higher prices. More significance was
attached to the demand for United
States Government securities than TO
any other one development. because
ii seemed to reflect the opinion Of the
banking community that money was
destined to remain easy. Compara-
lively at least, for a long time 10
come, and that there was no check IN
sight to the upward movement IN
bonds The fact that buying interest
in governments. centered around the
Treasury obligation rather than the
Liberties, was regarded as conflrma-
ton Of this view. The Treasury
bonds are of longer terms than the
older Liberties, some of which are
approaching maturity. All three OF
these Treasury issues show this week
higher prices than ever before in their
history.
This steady push ahead in Govern
ment bonds was all the more remark
able because il came on top OF a SINH
lar advance IN the preceding week.
The sustained advance has inspired
confidence in the future Of the whole
market Banking interests that sub
scribed to the Trea sury offerings at
original prices now have large prontS.
For instance. the Treasury 4l2S were
offered to the public in October. l922,
at par and they sold this week l0
points above that price: Cams IN the
other two issues, although not so
large because of the lower coupon
rate, arc impressive.
Yokohama Bond Issue.
As the time approaches for the pay
ing off of the Third Liberty Loan 1t
becomes more and more certain that
any new long term bond issue VIII net
the buyer not more than 312 per cent,
or the lowest since the first Liberty
loan was sold in 1917. and that was
marketed as an entirely tax exempt
security which any new loan VIII
not he.
Belief in higher prices for fixed in
:erest rate bearing securities was IL
Illustrated in an entirely different quar-
ter, but with almost as much force.
when the new Yokohama per cent
bonds were offered early in the week.
The price fixed by the bankers was
a3. to give a maturity yield of about
$50 per cent and at the time the or
fering was made Japanese 6l2s,
which certainly rate just as high
from the investment standpoint. were
selling at par to give about the same
return as the municipal bonds. The
rush to buy the Yokohama issue was
one of the outstanding features OF the
weeks trading. and before they had
been on the market "a hours they hao
sold at point premium, while at the
same time japanese 6l2s dropped
back below par.
Now the reason the new bonds were
favored over the old was not that
they had any better security. The eX-
planation Law in the fact that the
Japanese government direct obliga-
tionS were selling at the price at
which they are redeemable, whereas
there was a spread of 1 points be
tween the offering and redemption
prices of the new bonds. 1t was this
possibility of appreciation in market
price, if and when the general invest
ment market works higher, that made
the new issue so attractive.
Narrow Price Spread.
Elsewhere in the market the trend
has been to narrow the price spread
between the high.grade and the sec
ond.class bonds. This influence was
at work in domestic and foreign Sc
rurities alike. 1t resulted in Substan'
tial advances in adjustment ana IN
come railway and traction issues
French and Belgian bonds among the
foreign. 1t was probably effective IN
tho speculative list, as well, although
here the strength in the stock market
was partly responsible.
In 50 far as this strength in bonds
is based on easy money and the com
modify price situation II Is SOUND.
In so far as il reflects larger earn,
incS of the corporations concerned
he position is not 50 secure. In the
same way a distinction ought to he
lr,,yO between those foreign bonds
which bring better prices because
there has been an Improvement In
,bc financial condition of the debtor
governments and those which nave
gone up simply because they present
cd a more attractive yield IN com
harrison with the average. Probably
the market has been more dIScrim-
mating in foreign than in domestic
Investments with respect to this one
point.
Rail Setbacks Sure.
It is easonable to expect rall-
road earnings to 20 on increasing
from month TO month as they have
been doing for the past year or SO.
There are sure to be SetbackS. mn
r,ortant ones possibly. if general bust
ter of railway taxes to take into con
Sideration. This is a very important
item aud in one or two very recent
instances higher taxation has been
The deciding factor in bringing about
lower net income. When railway
bond is 50 well secured by property
value and SO well protected by earn
ings under even the most adverse
conditions, current results make 70
difference in its investment status.
such bonds may be expected to so
higher if money continues as abun-
dant as al present. Junior oblfGa.
lions of the weaker roads. on the
other hand, will not be bought at ad-
Nanring prices when monthly state
nents begin to show decreases in
stead Of increases compared with the
same month a year previous.
Theoretically the same rule applies
10 the utilities. hut these. unlike the
others, give no sign of any slaCkening
Of the rate of earnings increase. AL
mcst without exception the electric
light and power companies report
higher gross and net earnings as
each month goes by. Some time. of
course. there must be a halt, but II is
not vet in sight. Perhaps il will
come when customers begin to clamor
for lower rates for service.