Evening star., 1926-06-06
FOREIGN BOND LIST
IS FINDING FAVOR
Trend in Higher Yielding
Railroad Issues Also Is
Upward Now.
BY GEORGE T. HUGHES.
Dispatch to The Star.

bN UEOhUE L. III THES.
Special Dispatch to The Star.
NEW YORK, June 5.-The two fea
lures of the Investment situation thi
week have been the renewed interes
in foreign securities and the increased
favor toward the higher yielding rail
road bonds.
While there was some rea ction to
ward the close of the week the trent
OF prices in foreign dollar bonds was
distinctly upward. This was true o.
both European and South American
descriptions. In the former class the
leaders were the German and French
bonds and to a less extent some ol
the central European issues.
AS far as France was concerned the
market took an optimistic view on the
war debt situation and it refused tt
be disturbed by the fluctuations OF
the franc. There was even talk at one
time of the preparations for new
French loan or dollar credit TO be
used in stabilizing French currency
once the war debt agreement had been
ratified by Congress and the French
Parliament. This was certainly pre-
mature. to say the least. but the
story was not without marked erect
Still Has Hard Path.
For one thing the debt agreement
has still a hard path before 1t. both
at Washington and Paris and many
things can happen before final Solu
ton is reached. In the second place 1t
will he no easv task to distribute a
new French bond issue to American
investors when the older French obi
cations are selling to yield nearly
per cent.
Buving Of German government and
German industrial securities went on
even more briskly than in other sec
tions of the foreign list, For the
time being exchange differences were
ignored and only the immediate out
look was considered. Probably a GER
tain amount of this buying originated
on the other side. These movements
are difficult to trace and an unquall-
fed statement cannot I've Nentureu,
hut. Notwithstanding the change IN
recent years. ii is still true that brlt-
ish investors are willing to pay high
er prices and to accept lower returns
on foreign bonds than are Americans.
The other influence. which was even
more effective in turning attention
toward foreign obligations. was the
lure of the high return, compared TO
that ohtainable at home. AS the gen
eral bond market works slowly high
er, foreign issues look more attractive
to those to whom current income is
more important than high degree
of safety. This is doubtless the real
explanation of the upward progress
in the South American group. al
though il is coming to be better
understood that the market price OF
these bonds has nearly always over
estimated the risk.
Have Established Themselves.
Summing it all up. it can safely he
said that foreign investments, taken
as a whole have established them
selves more firmly i'll conservative
favor than ever before. Witness the
fact of the German government in
ternational per cent loan selling
this week at a new high record price.
Interest in the jultiOr railroad
bonds was partly investment and
partly speculative. Traders had the
widespread belief that details Of a
new Nickel Plate merger plan would
be announced shortly and that 1t
would he cast in such form as would
command the approval of the Inter-
state Commerce Commission. Now
nothing stimulates speculative imagi-
nation SO much as a prospective COM
binatIon, whether in the industrial or
the railroad field. SO there was buy
1DS OIL tTS lower pl1Ceu railway DOIuS,
principally the Erie issues. which are
obligations of the road to be taken
into the Van Sweringen group. That
sort of market movement does not
commend itself to the judicious nearly
as much as one that is founded upon
Increasing equities behind corpora
tions securities Fortunately the mar
gin of safety for a great many of
these railroad bonds is steadily grow
ing as earnings increase and the gen
eral railroad outlook becomes brighter.
1t will be two weeks before the May
statements of the railroad begin to
come in. but unless business falls off
al a rate which no one expects now
results for last month will comnare
favorably with those of April. when,
with the exception of April, 1928. class
! roads made new high record for
that month in total net operating in
come. This does not mean that all
the carriers participated equally in
these gratifying gains. Some of them
did better and some not so well. but
in the aggregate the showing was re-
markably good.
Have Discounted improvement.
Probably the market price of a good
many railroad securities has already
discounted much of the improvement.
That is more likely to he the case with
stocks than with bonds. At any rate,
when an .lventor can find mortgage
secured bond, not necessarily a prior
lien either. that will net him 512 per
cent or more and is at the same time
the obligation Of corporation which
ia continuously lettering it's financial
status. and all this in rising bond
market, he is not going to go far
wrong by availing himself of the OPP
portunity.
Outside these two groups, the for
eign and the junior rails. the general
market has been rather dull, with no
new incentive to buyer or seller. The
very highest grade Of investment
bonds for the present at least seem
to have measured the ease in money.
Speculative industrials have moved in
accord with the conditions in their
respective industries. Public utility
offerings continue to he well taken.
but there is a scarcity of the grade
most in demand, first mortgage loans
of operating companies.