Evening star., 1926-03-28
BONDS WITHSTAND
ACID TEST IN WEEK
Stock Fluctuations and
Money Hardening Have Only
Small Effect.
BY GEORGE T. HUGHES.


Special Dispatch to The Star
NEW YORK. March 27.--The bond
markoI this week successfully with
stood a severe test. Stocks tuctuat-
cd widely. with an especially violent
decline on Wednesday and ner-
Vous and uncertain movement sub
Sequently Money rates hardened,
not only day To day loans, but TO a
slight degree time funds as Well.
Doubt about the business outlook
was freely expressed by those who
had been most optimistic month
or two ago. All this could not but
have had some effect on investment
securities. but the significant thing
was that the disturbance was SO
small.
If the average for all grades Is
taken bonds have suffered some de-
cline on the week. But if only the
strictly investment issues are eN-
amined il will be found that the price
level is practically unchanged. nor
does the whole story come out IN the
recorded quotations for trading on
the exchange. In the outside market,
where most of the buying is done
for the financial institutions. there
has been brisk inquiry all the week
Tor seasoned securities. The two
"
vigorous demand are the old line
underlying obligations Of the strong
est railroads and the first mortgage
e bonds of the telephone. electric light
and gas companies.
Money Advance Temporary.
All this goes to show that in the
opinion of those whose business il is
TO keep themselves informed. the up
ward turn in money early in the
week was only temporary. Probably
Government operations had a good
deal to do with the money furry.
Something of the same kind must be
expected when preparations are
made for the April l interest and
dividend disbursements.
But nothing that has happened so
far is indicative of any change in
The long range outlook. Further
evidence of the release of funds from
speculation was furnished by the
figures on brokers' loans. There has
been some increase in demand on
account of commercial needs. as is
normal AT this season The con
solidAted statement of the Federal
Reserve banks showed the decline of
over ii point in the reserve ratio but
'he percentage of the New York bank
is higher thar last week and higher
than at the same time year ago.
PrOSt ect Of Amending Law.
Interes, in first mortgage utility
bonds was stimulated by the prospect
Of amending the New York State law
to il clude certain of these loans
whlcI meet stringent requirements
within the legal investment class.
Such action. if taken, will not in any
way strengthen the investment posi-
lion or the bonds in question, but it
will Improve their market and it will
be official recognition of the fact that
the bes- OF these issues are just as
sound as any of the corresponding
railroad obligations.
An illus ration of how large a mar
ket factor this matter of legality for
savings banks is, came the other day
in the 81 arp advance in the New
Orleans. Texas and Mexico issues
when they were officially declared to
he legal holdings in this State. AS
u stands now. practically the only
bonds savings banks can buy which
will yield over per cent are those
selling at premiums. Discount bonds
yielding per cent and at the same
time legal are very rare indeed.
While the inquiry for the very best
or railroad and utility issues was as
stated. strong all the week, the same
was not true of anything from the
middle grade down. All such sym
pathiZed more or less with the decline
in the stock market. At the same
time Few issues went surprisingly
well. Probably this was partly due
10 the comparatively small volume
of new offerings and partly to the fact
that investment bankers are making
prices attractive. The only foreign
issue was a South American loan,
which waA well received. The mar.
l5et has yet to demonstrate it's capac-
1ty to absorb any fresh large Euro
Dean financing.
There was a complete absence of
enthusiasm for seasoned foreign is
sues all the week. The foreign stu
alton involves too many points of
doubt Just now to encourage investors
in making new purchases. Irritation
over the terms of the war debt set
tleInent is only one of number of
disturbing symptoms. The French
financial problem is another. 1t looks
as though that situations was rapidly
becoming acute, with the franc down
to a record low. French dollar bonds
sold below anything recorded hitherto
this yeal, but at that the loss was
not large. for the extreme range on
these issues in 1926 has been only
hetweerI and 1 points, and all of
them are still we'll above their ex-
IRENE lows.
So far there has been no pressure
upon the market for these issues,
which are apparently we'll distributed
among investors who see no occasion
10 dispose of their holdings. Per
haps they are right. for it does not
necessarily follow that collapse in
the franc, If it does collapse, would
alter the status of French dollar
bonds.