Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-01-16
BOND LIST Strong
IN WEEKS TRADING
Foreign Groups Singled Out
for Special Attention
of Traders.
BY GEORGE T. HUGHES.

By GEORGE r. HUGHES.
Special Dispatch "a The star
NEW YORK. January 15-The
story of the weeks developments in
1.-The bond market il one of great activ-
sity. accompanied by steadily rising
prices, with new favorites taken up
as the advance in others slowed down
temporarily. Again the averages have
made a new high since 1918 for do
mestic bonds and new high for all
time for the foreign group.
The strength in the market has been
surprise even TO those who were
most optimistic about the reinvest.
ment demand two weeks ago. 1t had
been expected that the large disburse-
ments of interest and dividends on
the first of the year--a record-break-
ing sum, by the way--would flow back
into investment securities, but the re-
suit exceeded all anticipations.
High Yields Attractive.
Naturally enough, il was the higher
yielding varieties which were in the
most urgent demand because these
combine speculative possibilities with
investment value and yet the so-called
gilt-edge bonds were not neglected and
United States Government securities
held firmly around the best prices of
the month and of last year, with the
Treasury obligations selling at ap.
proximateIy the highest since they
were first put out. The volume of
trading on the exchange on one day
of the week was the grea test in two
years and this does not take into ac-
count the dealings over the counter
which in some issues are always larger
than those made ION the board"
The question asked now is how
much further the advance is likely to
60 and whether or not a reaction is
in order. OF course, as to that no one
can speak with confidence, but al
least it can be said that there is no
g change, or any sign of any change,
in the fundamentals back OF the rise.
These are: First. the abundant sup
ply OF money, and second. the down
ward trend in commodity prices OF
the two the money factor Is playing
the larger part just now. The trend
in commodities operates as an infiu.
ence on bond prices very slowly, but
falling rates for money act as an i'm
mediate stimulant. Now what is the
situation with regard to money? The
quotation for day-to-day funds. which
is of the most interest to spectators
IN stocks, is not SO important as is
the trend of commercial paper. Still
IT is interesting that buyers of stock
on borrowed money have been able to
Hnance their commitments this week
at lower rate on the average than
in months past. More significant is
the decline in the quotation for bank
eEs acceptances and a distinctly
easier tone in the market for CONNER
cial paper
Reserve Ratio Higher.
The weekly statement of the Fed
eral Reserve banks shows a reserve
ratio over 4 points higher than it
was a week ago and more than 2h
points above what it was in the same
week of 1926. Holdings of discounted
bills are down heavily on the week
and slightly on the year. Part of this
Is seasonal, but, whatever the reason,
the fact remains the same: the bust
ness OF the country is being carried
on with less recourse to the facilities
OF the Federal Reserve system. Under
these circumstances, ii was natural
that reports of a prospective reduction
In the rediscount rate of the New
York Reserve Bank should have be-
come widespread. No action to this
effect was taken at this weeks meet.
ing, however. That something of the
KIND VIII be done in the more or leEss
immediate future Is confidently he.
lieved, The only argument to the
contrary is that reduction might be
taken as an invitation to increase
speculative activities.
III any one group of bonds was
singled out for special attention this
week, il was the foreign group. The
bidding up process went on with more
enthusiasm in this part of the list
than anywhere else and obligations of
France. Germany and Italy in Europe
and of Brazil in South America went
easily to new high levels. Sometimes
there was reason for the higher mar
ket valuation in the financial and
economic conditions in the countries
represented. but more often there
was no change whatever In the actual
situation of the debtor nations. 1t was
simply that domestic securities having
advanced so far that the Yields on
them were no longer attractive to
those buyers who felt able to assume
a certain amount of risk, there was a
diversion to the larger return obtain.
able on foreign obligations.
Italian Bonds Sympathetic.
The only proviso was that there be
no adverse developments affecting the
particular country or security in
yolved. For instance. nothing new has
taken place In Italy to make interest
and principal on Italian dollar bonds
mora secure than il was six months
ago. What has happened is that all
the other Z per cent European dollar
loans having gone through their pre-
vious high points, the Italian issue
moved up in sympathy. II this process
should go on few weeks more z per
cent returns in good foreign bonds will
become as rate as they were common
during most of 1926. AS ii is, Belgian
obligations are selling to yield only
6h per cent and the same is true of
most of the German descriptions
The same point may be made with
regard to the domestic railway bonds.
The junior issues which have been in
such high favor this week are not
protected by any larger equities, In
either assets or earnings than they
have been for some time now. Here,
too It is a narrowing of the spread
between the best and second best
which always accompanies a rising
market for fixed interest rate bearing
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