Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-01-23
BONDS CONTINUE
STEADY ADVANCE
Predictions of Reaction Fail
to MateriaIize as Prices
Push Higher.
BY GEORGE T. HUGHES.

ID
Special Dispatch 10 The star,
NEW YORK. January 22.-~The
bond market has continued TO push
ahead to new high levels this week
Notwithstanding the large advance it
has enjoyed since the first of the
year. At the close of the week the
averages were right at the peak. On
one or two days the market hesitated
but 1t never really reacted, and after
realizing sales by traders and specu-
lators had been absorbed the upward
movement was resumed.
= Predictions of reaction have been
freely made all week but they have
not been realized. As a matter of
fact, there is only one reason for
anticipating "A setback and that is
that prices are now so high in COM
parlson with anything seen since
before the war. There has been no
p change In fundamental conditions and
none is in sight. The downward
trend in money and the ready accept
ance of new offerings are just as
prominent factors as they have been
all along.
When an investor looking over his
list sees a large profit ON his holdings
and is tempted to accept it, he is con-
fronted with the problem of reinvest-
Ing to better advantage, and that
seems insoluble. Higher yields can
be obtained, but only at sacrifice of
quality or the assumption of some
additional risk
Shift to Foreign Bonds.
There has been good deal of shift
Ing from domestic into foreign securi-
ties, with a consequent Improvement
2 IN income, process which is account
anIe Tor the strength in the foreign
INST, but even granting that foreign
bonds are entitled to a better rating
now than ever before. any extensive
change of this kind weakens the in
Vestment position to certain extent.
In character the weeks trading re-
Sembled that of last week. AS far as
there was any new development it was
IN the better inquiry for the highest
grade railroad bonds, class that had
been comparatively neglected up to
this time. Even this week, however.
the gains here were very moderate.
Ihere has been nothing in this part of
the list to compare with the buying
of United States Government obliga-
ions, which the banks seem to prefer
10 corporate obligations. Perhaps the
preference for long term over short
term bonds has been more decided this
week, although that too has been in
evidence all along.
Selling of Liberties.
There has been selling of the Liberty
second and third Ans, the former re-
deemable at the Government option
this year and the latter maturing next
year, to buy the longer term Liberties,
the first and the forth 41as Liberties,
both of which sold this week higher
than ever before. All the treasury
bonds have set up new high records
also and they are of longer maturity
than any of the Liberties For the
first time this week. too, one long term
Govern mt bond the Treasury 34,
has sold to yield less than 315 per cent.
There is no longer any doubt that
the Secretary of the Treasury will be
able to sci the next long term loan on
better terms to the Government than
at any time since the first Liberty
31es were marketed. One authority
has gone so far as to deduce from a
plotting of the price curve of Govern.
ment bonds for the past half dozen
years that by 1880 the average yield
Will come down to about 312 per cent.
Without necessarily accepting this con
ciusion, it can be admitted that the
outlook fayors lower returns on United
States securities than the IL per cent
now ia sight.
Foreign Leaders Vary.
The leaders in the foreign group
have varied from day to day. At one
time ii was the French, at another
Belgian, then Italian and German
and finally Brazilian obligations that
would be taken up. The rise of the
Italian government bonds to record
high testified to the underlying
strength of the demand when it is re-
membered that this issue was never as
well placed as the other large foreign
loans The floating supply of Italian Is
is larger than that of most others in
the same class, and so it looks more
concentrated l.. ing will be necessary
to advance the price.
There has been nothing in the Eu.
ropean news to influence the market
for the European bonds: the improve
ment was brought about by the same
conditions operative I'm domestic bonds
The case was a little different with
Brazil, where distinct progress toward
financial rehabilitation has been made.
This helped the market for the bonds,
which was also favorably affected by
the better attitude displayed in London,
S1uth American Borrowers.
New foreign financing is mostly for
account of South American borrowers
with spiinkling of continental Eu-
ropean utility and industrial offerings
There is no reason to change the
opinion heretofore expressed in this
correspondence that the total of new
foreign financing this year viii fall
below that of 1926. France may make
heavy demands upon the market pro-
vided the debt funding agreement is
ratified, but that is likely to be made
up for by smaller borrowings from
other countries. If this comes to pass
ii will be another reason for expecting
still ,igher prices for outstanding
foreign bonds.
Aside from bonds entirely. the in.
vestment demand has shown itself in
the second and third grade preferred
stocks more strongly this week than
in a long time. Issues which have
been quiescent for months past have
come to life. To a less degree this
has been true Of certain common
stocks, mostly those without sneeuia,
tive attraction and selling on invest
ment merit only. There are still many
opportunities in this part of the mar
kef hut they are likely to grow less as