Evening star., 1926-11-21
INTEREST CENTERS
ONSTANDARD ISSUE
Continued Strength of All
High-Grade Securities Is
Feature of Market.
By GEORGE T. HUGHES.

VpOSA1A OAbphtCu 70 1U6 0tdT.
NEW YORK. November 20.-
Vhis has been a week Of unusual in
terest in the investment market. II
the first place there was the continued
show Of strength in all highgrads
securities, including new high record,
;n some Of the United States Treas
Try bonds. and in the second place
there has been a renewal Of the conf
dent buying in French dollar bonds
which carried prices to new high
levels for the year at any rate.
But more significant, perhaps, thar
either Of these two developments was
the reception accorded the announced
tntention Of the Standard Oil of New
Jersey to retire its preferred stock
and substitute therefor an additional
issue or commo nstock and a newly
created per cent debenture bond.
The Standard Oil Of New Jersey in
cident Is interesting in more than one
respect. The fact that orders for
'he new bonds have poured In from
ell over the country in amount suf.
iclent to insure very heavy over.
subscription was proof of the ready
market now existing for prime in
vestments. Nor did prospective buy.
ers wait to hear the exact terms of
the new Offering. They were ready
TO take Il at whateve price and what.
ever conditions the bankers saw fit
no stipulate, or at least 1t seemed that
way. Something like a 4.S0 per cent
basis was bid for the bonds tmmedi.
ately after the announcement was
made.
Attitude Of Company.
Then, again. interest attached to the
reasons that moved the directors Of
This great Industrial organizst on to
take the action they did at the time
they did. Evidently they were conf
dent bonds could easily be sold and at
a price favorable to the seller Evi.
IDENTIFY, too. they thought this would
be as good time to effect the sepa-
ration as six months later.
Another point about this transac.
ton is worthy Of comment. 1t is only
very recently, and not often even
now, that any corporation has sub.
stituted bonds carrying a fixed
charge for preferred stock which
technically has only a contingent
charge on earnings. One prominent
Canadian public utility recapitalized
along this line month or SO ago,
but such instances are not common.
The railroads are working in exactly
the opposite direction. 1t is their
ambition to increase the proportion
of stock to bonds in their capital.
Zation.
OF course las far as Standard Oil Of
New Jersey is concerned, its pre-
ferred stock was always practically
RS secure from the income standpoint
as a bond. Probably only the cor.
porations whose financial strength
is unquestionable under any con.
Ceivable circumstances would care to
undertake this sort of operation. Re-
tirement OF preferred stock also
nullifies the supposed advantage Of
having a large number of small
stockholders bound up by personal
interest in the welfare of the COM
pany. Realization of this fact doubt
less led the directors to give the
preference In allotments of the new
bonds to the preferred stockholders.
Foreign Bonds Improve.
The weeks improvement in foreign
dollar bonds was impressive. Par
ticularly was this the case in the
French list, where prices went higher
than at any previous time this year.
Probably buying was encouraged, by
the remarkable upturn in the French
franc and an evident return Of cap
ital to that country. When the
French people began to exhibit faith
action Of French external obligations
would naturally be favorable.
Another factor was the turning of
investors willing to assume a certain
amount of risk away from the domes-
tic field, where opportunities are
steadily becoming more limited, to
foreign securities on which not only
IS the return higher but the chances
OF market price appreciation are ap.
parently bright.
The fact is that the average buyer
Of foreign bonds is not content sim.
ply with large current income un
leas there is also room for specula-
tive profits In addition. Obviously
from this standpoint, French and Bel
gtAh bonds offer advantages hard to
find elsewhere. German dollar bonds
give high income returns. not as high
as the French though still very attrac-
tive. but they are steadily approach
ing prices at which they are callable.
The redemption provisions act as an
automatic bar to market advance and
unless one has culled the list care
fully in recent weeks, the discovery
Of the narrowing margin between the
market and the call plice in the case
Of most Of the German external OBJ
legations will be surprise. No such
condition exists In French bonds or
for that matter. In Belgian. which this
week have shared In the favor &C.
corded to the French.
Market Is Broad.
The feature Of the general market
during the week was its breadth.
Seasoned bonds of all descriptions
were In demand and some of the un.
derlying railroad assures were more
active than in months past. It was
primarily an investment market and
not a speculative one. Buying
seemed to be for account Of those who
had capital to employ permanently
and not for those who simply wished
to hold until they could sell to some
one else at a higher price.
Nothing happened in money to
check the upward movement in bonds.
which as the week ended were practi.
oally at the peak for ten years past.
There was no sign anywhere Of any
hardening in money rates. which
would have an adverse effect on bond
values, The talk was of a reduction
in the rediscount OF the Federal Re.
serve rate Of the New York bank. not
Of an advance as II was a month or
two ago. Prices. however. do noA al
ways move in one direction. It
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