Evening star., 1926-06-01
RISE IMPRESSIVE
s4B
IN BOND MARKET
Large Amount of Investment
Funds Available for
New Issues.
Special Dispatch to The Star.

NEW YORK. June 1.-Further
progress toward higher prices was
made by the bond market in May.
Gains were small, numerically speak
ing, as they always are in strictly
high grade investment securities. But
they were persistent and impressive,
nevertheless, coming as they did after
a rise prolonged over many weeks.
Naturally enough, the very fact
that the market has been so strong
for so long a. time has stimulated con-
fidence in it's future. The spectacle OF
advancing quotations in bonds while
stocks were declining and sentiment
In speculative circles was pessimlst1c
at times extremely so, was reassuring
to investors.
Followers OF the long term trend In
bonds now speak Of the time when old
line, tested first mortgage issues OF
prosperous railroads will again sell on
a per cent net basis as they did 20
years ago and when United States
Government obligations Will sell to re-
tur naround 3 per cent on the money
il takes to buy them. Perhaps this Is
Doking too far ahead.
Pace Begins to Slacken.
AZ the average price goes higher
the rate OF gain becomes smaller and
the pace slackens. Then, too, there
are sure to be reactions and minor
setbacks. Speculative operations not
entirely lacking in bonds, even though
not as pronounced as In stocks, would
alone bring about recessions from
time to time. Some Of these reverses
might easily last for months and still
not negative the theory that over
;-~riC-- - :e-lrs t:-e ~ -~>tment market
is headed toward still higher levels.
The fundamental conditions that
have contributed to the advance In
bonds remain the same. although the
form in which they disclosed them
selves has been altered somewhat
There is no important change in the
gold situation. Merchandise imports
have, it ia true, exceeded exports. but
without affecting the gold movement.
Money remains easy and Yet the rates
charged for time and for day-to'day
accommodation in the Stock Market
have not been as low as might have
been expected from the statistical po-
sition. In xplanation It has been Sug-
gested that the bond market Is prov
ing a formidable competitor with the
short-time money market, and prob.
ably this is correct in part, at least.
Banks have been finding 1t more
profitable to accumulate securities
than to loan money on call or even
on time.
Commodity Prices Steady.
AS far as commodity prices go there
has not been much change. Tempo
rarily there seems to be a check to
the decline, but. on the other hand.
there Is no tendency for the Index
numbers to advance significantly.
<,f rNv-ip -.
fully as important a factor in fore
casting the future of the bond mar.
ket as is money. About all that can
be said of the developments this
month Is that commodity prices. al
though stabilized for the time. have
not yet indicated a turn in direction
such as would precede a depression
in the market valuation of fixed rate
interest bearing securities.
About one thing there can be no
dispute. There is an abunda nee of
capital seeking employment. The
ready sale OF new offerings Is suf,
ficient proof Of this. To have a new
issue 'oversubscribed" IS the rule
and not the exception in these days.
Some of these "oversubscriptions."
too have been for offerings not of
the first grade. 1t has become easier
to sell honds secured only by stock
collateral or not secured at all, mere
ly debentures.
So far this tendency has not be-
come universal enough to be disturb
ing. but it IS sign that stage
has been reached in the advance
when the shrewd investor will scan
new fnan nding with little more
caution.
Seek Higher Yield.
,~.,1It o. a.
gree Of security for the sake Of a
higher yield has been even more ev-
dent in the market for seasoned bond
obligations than in that for those
lust introduced. The rise in the
junior railroad issues illustrates the
point. There has been particularly
aggressive buying of the lower cou
pom rate railroad bonds selling at a
substa ntial discount and preceded by
many prior liens. Generally 1t has
been obligations Of roads which for
the last year or two have been re-
gaining earning power. To that de-
gree the demand has been selective.
It has not. however. stopped at fixed
charge bonds but has taken in some
on which interest IL payable only II
earned. adjustment and income is
sues. in other words. This is. Of
course a speculative operation, even
though 1t occurs in the investment
field
Notwithsta nding all this spreading
out Of the interest to take in the mid.
die and second grade bonds, there has
been no weakening in the prices asked
in the high grade group. United
States Government obligations and the
first mortgage savings bank railroad |
issues are selling at approximately
the high Of the year. Anything new
which comes out and grades up in
this class is quickly taken. The best
evidence of this was the sale this
month of 10000. 900 New England
Telephone and Telegraph bonds with
a. Az per cent coupon and at a price
to weld only 4.S0 per cent. This was
the second public utility long term
bond to be marketed since the war
with SO low a coupon rate, but 1t was
quickly oversubscribed and sales made !
at a, small premium over the offering
price.
Supply Is Limited.
One difficulty fastidious buyers have
found meeting their investment needs
is that the supply Of these high grade
bonds with possibilities of price en-
hancement in the event that the mar
ket as a. whole continues it's upward
movement, is limited by the callable
provisions so many of these older