Evening star., 1927-11-13
BONDS ARE At PEAK
FOR LAST 25 YEARS
Success of Government FL
nancing One Cause-Good
Rail Issues Strong.
BY GEORGE T. HUGHES.

BY GEORGE T. HUGHES.
Special Dispatch TO The Star
NEW YORK, November 12.-The
Investment market closed the week
with prices for the highest grade of
securities at the peak for - years. All
the hesitation that marked trading In
bonds for the past month or so disap-
reared and the upward movement was
resumed impressively.
One reason, of course, was the sue
cess of the Government financing. 1T
had been expected that the new $4o,-
OO0. 600 of Treasury 3is per cent GER
tjficates Of Indebtedness would be read
ily placed. but the fact that they were
nearly three times oversubscrlbed
was a surprise. 1t went to snow
not only the effect of excess capital.
but that of a constantly diminishing
supply of Government obligations.
Buying of other Government bonds
was stimulated immediately and near
ly all the outstanding Treasury issues
changed hands at the highest prices
of record.
Government Eant!s Strong.
Strength in Government bonds. how
ever. had been feature of the pre-
Vious week The movement was car
ried further this week. but il was really
nothing new The development that
was of even more significance from
the lonc range viewpoint was the bid
ding up of the first mortgage railroad
issues. For example. Union Pacific
first Is sold on Friday at par for the
first time since the early '90s. When
n 20.year railroad bond even of the ao.
mittedly high quality of Union Pacific
4s of 1947 sells on a straight per
cent maturity basis. it is a graphic il
IuStration of the progress that has
been made toward restoring the low
interest rates of the opening years of
the present century. 1t is only six
years ago that this same bond sold
at IS, or % points lower.
Oher gilt-edce railroad investment
bonds have been in comparable de-
mand. The strength has been com
municated to middle grade securities
to certain degree. but speculative
issues have been little affected What
is wanted is bond of investment
quality and nothing else. Along this
line the steps taken by many corpora
tions toward simplifying their capital
structure are important. IL bond
now junior lien can he raised to the
position of first mortgage by the re-
tirement of underlying issues. its mar
let status is improved at once. 1t
has been reported that the st. Louis
San Francisco is planning something
of this kind and the advance in that
roads prior lien "A" s4s for 1850 is
based on this proposition. That this
bond could sell almost on 4.3 per
cent basis is in itself an indication of
the character of the present market.
Better Inquiry for Offerings.
simultaneously with the gains in
the market for seasoned bonds. there
has come better inquiry for new Of
ferings There are still undissolved
svndicates and unplaced issues. but
they are mostly foreign obligations
end only one or two of them Isl OF any
large size The falling off in volume
Of new offerings has helped. the total
this week havin. been around Sln6.- |
OG0. 900 az against over Sll1.o0o,ooo
q week AGO. Two weeks ago the total
was around s1S7 900. 600, and in the
week ended October - the aggregate
was $3.50. 900 900.
There rave been number or un
usually interesting new offerings
First and foremost was the S5o,oo0.0Oo
International Match 20-year per cent
debentures. priced point and half
below par The proceeds of these de'
bentures wilt be used by the corpora
ton to acquire from the swedish
Match Co. $50, ,000. 900 out of total
issue OF S75,000.000 government OF the
French Republic 40-year 5 per cent
bonds. The French government In
turn will apply the proceeds to the
retirement of the per cent dollar is
sue originally marketed in the United
: States in 1920.
Obviates New Financing.
This is solution that obviates any
ruling by the administration at Wash
ington on the deslrablllty or new
French financing on this side, whiie
the debt refunding agreement with the
United States Is still unratifled.
has heen agreed all along that French
credit has improved so much that
new French dollar bond could be sole
On per cent basis, but there wa:
aIways uncertainty as to the attitude
of our state Department. Now tn'
French have obtained the funds TO re
tire their per cent issue on even
more favorable terms and the moneS
comes indirectly from American lnNes
tors. News of this operation brouSht
about an ADVANCE III ln6 OlHpI iSHti
dollar bonds, especially the YES which
are non-cailable.
Another interesting new issue was
the 81 ,O00. 900 Potrero Sugar first Z;
running 20 years and priced to yield
about 10 per cent. This is said to
be the first Mexican industrial issue
placed here since the days OF the Diaz
administration. A novel feature i
the insurance which has been taken
out in an amount equal to the pal
value of the bonds to be outstanding
covering risks due to revolutions ant
civil commotions of any kind, includ
ing confiscatton or appropriation Of
the plant Without some such pro-
vision il would probably haye been
impossible to persuade American in
vestors to put their money into ar
enterprise wholly located in Mexico.
Like bonds, stocks closed the week
strong. The two markets are really
affected by the same influences. The
difference is that easy money doc
not make stocks uniformly strong
when there are so many doubts about
the trade position. Whenever divi
dends are assured. however, aDf the
stock is Of real investment grade id!t
ca pital seeks il out just as it doe
high-grade bonds. This is what has
been back of the weeks recovery i.
the stock market
q