Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-06-13
TREASURY ACTON
STARTtES BANKERS
No Financing June Is Sur
prise-Third Liberty Due
September IS, 1923.
By GEORGE r. HUGHES.
Spe cial Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK. June 12.The Incl
dent that attracted the most attention
in investment circles this week va
the unexpected announcement from
Washington that there would be ne
June 10 Treasury financing. The
lanking community: was unpreparet
S1,s any such development 1t was
She first time since the war tina
there has been no necessity for some
offering of securities to take care OF
maturing obligations.
Expectation that funds accumulated
to acquire whatever the Treasury
might have offered would now be oil
verted to other channels had an I'm
. mediate stimulating influence on the
bond market. Prices for outstanding
Liberties and Treasury bonds moved
up. not extensively but significantly
1t was be tier realized that the volume
of United States Government obliga
lions available for investment was
steadily shrinking and that when the
time comes to refund maturing LIB
erty loans it will be done at a rate
more favorable to the Government
and on lower Yield basis to the in
weston
Long Term Issue.
Three months ago Secretary Mellon
offered a long-term bond issue with 4
49, per cent coupon, priced at l0012
The bonds were marketed just after
the severe March break in the stock
market. and bankers, or some OF them
at least. thought the Secretary WcS
over-optimistic. The event. however.
has justified him, and late this week
the bonds sold at a record hlsh,
bringing the yield thereon down to
about $50 per cent.
Now. simply because there was nc
new Government financing this
month it does not follow that there
are not difficult problems ahead. The
third Liberty loan falls due Septem
Der Is, 1928. This is now outstanding
to the amount of about $2,725. 00O. 900.
Meanwhile next year the second Lib
erty loan, which does not mature
until 1912. nevertheless becomes re
deemaoie at par at the option of the
Government
Undoubtedly plans for .refundinG
the third Liberty and for taking ad
vantage of the privilege of Substi
tuting another obligation for the sec
ond Liberty loan are already under
consideration. The belief was express
ed this week that "A saving to the
Treasury of per cent might be eff
fected by the sale of a 3A per cent
refunding issue. Probably that could
not be done now. but at any rate one
thing is plain and that is that yields
on United STATES Government obliga
lions arc going to be lower from
now on.
Switch to Municipals.
1t is also worthy of note that tax
exemption does not enter into the
matter or fixing a price for Govern
ment securities to the degree that il
formerly did After July |. except for
the first Liberty 3Ias. only total
amount of $1,000 in Liberties for any
one holder has tax exemption. Indi-
yidual investors affected thereby have
been switching into municipal bonds.
but there has been no price weaken
ing in the Liberty list on this ac-
count.
The general bond market itself has
continued strong all the week, with
the average price at the high of the
year, and that means at the highest
since 1917. While. as already indi-
Gated, this strength has been evident
In the high-grade group. including
Government bonds and first mortgage
rails, 1t has not been confined to this
class of securities. The advance keeps
broadening out to include the higher
yielding obligations technically not
considered the most conservative. but
still of undoubted safety and with an
improving outlook.
An illustration or two will make
the point clearer. Under it's present
management the Missouri Pacific has
Yplod 10 troy -ty-iI
ening its financial position in recent
years. In a general way this fact
has been recognized in both the stock
and bond markets. Missouri Pacific
general as, one of the most active
of the Missouri Pacific bonds, have
however been tagging behind similar
railway issues because of the fact
that II is Junior lien on the property
and that new financing will probably
be done under the mortgage that
comes ahead of these bonds. Partly
because of the progress of the road
and partly because of demand for
better than can be found in bonds
technically better rated. Missouri
Pacific general As were taken up this
week and the price advanced to the
highest since they We're first issued.
South American Issues.
The situation in the foreign group
emphasize the same condition. Take
the South American bonds. for in.
stance. Many of these carry s per
cent coupons and many involve a
certain amount of risk. political or
financial, but not one of them listed
on the stock exchange is any longer
purchasable below par and most of
them sell at substantial premiums.
There has been on change in circum-
stances affecting the credit Of these
South American borrowers. 1t is
simply a part of the general lower
ing of yields. AS those countries enter
the market for new funds they are
able to command better terms.
In still another direction the strength
of the investment demand has been
evident this week and that is in the
market for the public utility preferred
stock. The majority of these are
bought and sold in the outside market
and so attract ordinarily little at
tention from trades. This week the
quotations for these stocks have been
gradually advancing. but that is not
the whole story. Close examination
reveals that buying orders outnumber
selling offers. For the most desirable
OF these preferred issues the supply is
strictly limited.