Evening star., 1926-05-23
At HIGH Of: DECADE,
BOND LIST IS FIRM
General Price Level Above
That of Past Few Years.
Demand Is Good.
BY GEORGE T. HUGHES.


Special Dispatch 10 The Star.
NEW YORK, May 22.-The bont
market gave another remarkable &C
count Of itself this week. Prices are
now approximately at the high OF
the past 10 years. There are varia
lions in the calculation according tC
which issues are selected to make uI
the average. The exact figures are
not very important. The main thing
is that the general level compared
with anything recently Is very high
and that demand for desirable me
diums in which to invest surplus
funds continues unsatisfled.
Naturally enough, the spectacle OF
advancing prices makes for optimism
among bond dealers and bond IN
vestors The tendency is as quota
lions for the gilt-edge group go nish'
~ to turn attention toward oblsa-
lions of lower rank. but with hlsnei
return. The market has been look
ing that way this week.
Best Bonds Neglected.
While the strictly high-grade group
has not weakened. il has been com
paratively neglected in favor OF iliio-
die and second grade issues. Which
have been bought with apparent con-
fidence all through the list. or course
this process of switching weakens IN
yestment nosition and increases risk.
II makes more necessary the stuus
Of current earnings to see II they
n,stifv market prices. The TACT is
that bonds have been going up, not
so much because equities behind them
have been increasing, but because
money must be employed. Bohds
..annot afford TO leave their fun6s
idle. and the call money market has
not been remunerative. 1t DehooNes
individual investors, therefore 10
make their selection with due regard
% tho merit Of specific issues. and
not TO invest indiScriminately Simply
because bond prices look SO strong.
Perhaps there are more reasons TOT
he rise in the junior railroad issues
.han elsewhere. The few roads WhlcIl
have reported April earnings SO Iai
Lave made good showings In comparl'
son with the results of a year ago:
The 1roba are that those SUI,
to make public their statements VIII
show the same trend, ana there are
students Of railroad statlstlcs VINO eA,
pect that May this year VIII compare
favorablv with May OF 1925. furthef
,b.,n that il is not very safe to go
until tho general business SITUATION.
an which traffic in the last analysis
,ranends. becomes clearer. GOOD crops
would. of course, help.
Public Utility ShOwinss.
With regard to the public utilities
the situation is not so even, oul
most of them show larger SURPRISES
after fixed charges. With the utlllties,
however. more attention IS pelis
maid 10 the position of the bonds III
he canital structure. This is some
thing often not easy to determine IN
,he complexity of holding company
formation. Analysis will show in many
instances that these utility holding
company bonds are not as sound IN
vestments as are the preferred STOCKS
nf the subsidiary company. when nave
a prior claim on earnings. Instltu-
1ional purchasers who are not allowed
to buy stocks take these holding com
pany bonds. but that is no reason why
The individual should overlook the
operating corporation preferred issue
which not uncommonly gives higher
Weld. All this said and done, there
is nothing in the outlook TO indicate
that the utility group as a whole is
losing ground in deserved investment
favor.
Coming down to the industrials, the
weeks market has been more selec-
tive It has recognized the differences
in trade conditions. This has been
notably so in the obligations Of cor
porations operating in lines where de-
preston prevails, as for instance.
sugar production and the textiles
Bonds of these companies have had
no share in the improvement in other
sections of the list.
Few Motor Bonds.
There are too few funded obliga-
lions of automobile companies avail
able to test sentiment from the in
y estment standpoint. The motor
manufacturers as a class have been
able TO finance their needs for the
most part without resorting to bond
issues. Nearly ali the iron and steel
liked interest bearing obligations are
50 well protected by property value
that they have not been disturbed
by the indications of a slackening in
'rade activity. In general. however,
investors have been inclined to let
industrial bonds drift.
Finally, allowing for the uncertain
les of the European situation, follow
ing boslds-that is, dollar issues-have
held their ground remarkably well.
1t has been something of a mystery
as to where the support for certain
OF these issues was coming and when
the average American investor was
observing Il strictly non-committal
policy as to foreign Investments. One
explanation rather widely accepted
this week was that the foreigners
themselves were buying their dollar
obligations in this market and taking
fhom home. In this way they would
still have an obligation of their own
ountry, but payable in a stable
monetary unit. Perhaps this theory
was not altogether correct, but it
was the occa sion Of a, good deal Of
comment.
1t still remains true that among
tho foreign bonds the ones which ap-
pear to be meeting a better demand
from home buyers are the South
Americans. Exchange difficulties do
not bulk SO large in South America
as in Europe, and the floating sup
ply of dollar bonds of the countries
In the continent to the south of us
is steadily diminishing.