Evening star., 1926-09-05
BONDS MAKE GOOD
SHOWING IN WEEK
Firm in Face of Increased De-
mand for Money for Com
merciaI Purposes.
BY GEORGE r. HUGHES.

BY GEORGE r. HUGHES.
NEW YORK, September Ain the
face of an increased demand upon the
money supply for commercial pur-
poses. the bond market this week has
given remarkably good account of
itself. In fact, If the averages for all
grades, including semi-speculative as
well as investment issues, are taken
it will be found that the quotation is
practically at the high of the year.
first reached in the middle of June.
This is true for domestic bonds and
in only a slightly lesser degree for
foreign obligations also.
The weekly statement of the Fed
eral Reserve banks showed increases
in holdings of discounted bills and in
note circulation and a corresponding
drop in the reserve ratio. the system
as whole and the New York bank
revealed the same trend, and yet the
bond market has been undisturbed.
Even Liberty bonds and Treasury
issues are up slightly on the week.
The conclusion is that investors are
convinced that the present hardening
in money is a seasonal phenomenon
and does not forecast any strinGency.
High Grade Bonds Inactive.
Although prices have held firm, ac-
tivity in the gilt edged group has been
on small scale. Trading has con-
cerned itself chiefly with the higher
Welding and more speculative de-
scriptions. In the railway list this
has meant adjustment and income
bonds. on which interest is payable
only if earned. But about the contin-
uity of disbursements there is no
present doubt in view of the earnings
situation. This list is smaller than 1t
was d year ago.
The Improvement in railroad condl-
tions has gone SO far that more and
more railroad bonds are now in
fluenced in their price movement by
money rates rather than by current
income. Roads that still offer posi-
bilities of price appreciation have
been in brisk demand all the week,
and some of them have made new
high records for the year. OF course.
it has not been bonds of the seasoned
dividend payers that have been the
objects Of this speculative buying, but
rather those Of roads the stocks of
which are comparatively low priced.
In this respect the trading in bonds
has differed from that in stocks.
Rails Outlook Bright.
The outlook for the railroads con-
tinues bright There is no indication
of a let-up either in traffic or in net
earnings, both of which, for many
roads, are making new records. This
has led to talk about more prosper
GUS carriers doing new financing by
sale of additional common stock. An
incident this week, however. shows
that there is still opportunity for
placing new bond issues on highly
favorable terms and that even the
largest earners among the railroads
are not likely entirely to abandon this
method of obtaining new funds. This
was the sale by the Illinois Central
of a s35 100000 issue on a less than
per cent basis and unsecured by
mortgage. Placing a loan OF this
character at a price to return SO
small an amount to the investor is
q convincing demonstration OF the
strength of the investment demand, as
we'll as the possibilities still open in
bond financing.
Along the same line. the high prices
at which the State Of New York sold
sos,475.OOc serial bonds is very inn
pressive The successful syndicate
bidders subsequently offered the
bonds to the public at prices to weld
from $50 to $50 per cent the lower
return for the shorter maturities
Only twice in the past dozen years has
the State been able to sell its securi-
ties at higher price OF course
the credit Of New York State is of the
highest and it's bonds are tax-exempt
securities, but income taxes have been
reduced. and money. while easy. is
not as low as it was. The way in
which all new offerings have been
taken has been very gratifying to the
investment bankers.
French Bonds Strong.
fo1I
pean obligations have held the center
Of the stage. Some of the French
bonds have reached new tops for this
wear and all of them have sold around
their best figures. This persistent
flrmness i'm French issues aug,irs we'll
for new French loan, provided tho
war debt agreement is ever ratified.
Meanwhile there has been no real
change in the French finan nc!al out
look Belgian bonds have done a lit
tie better this week and for this
there seems to be substantial foun
dation. Belgium is making progress
toward currency stabilization. and
Wall Street is talking about a new
Slo.00o.0 900 International loan. either
late this year or early next.
Finally the drastic def1ation meas
ures taken by the Italian government
had an effect not only on the lire, but
on Italian dollar bonds. which sold
this week higher than at any time
since the break following the dissolu
tion Of the syndicate.
The low prices which Italian obli
cations bring in the American market
reflect the difficulty our investors
have in understanding italian condi-
tions under the present government
and their uncertaity about what
would happen if. in the course of
events. there should be a successor to
Mussolini. Notwithstanding all the
doubts about foreign investments, the
higher yields they offer, compared
with domestic securities. is the lure.
which in the last analysis maintains