Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-01-09
Bonds STRENGTH
SURPRISES STREET
Largest Gain of Week Re-
( corded in Higher Yield
ing Obligations.
: by GEORGE T. HUGHES.
snnciaI nisnatch to The star

BY GEORGE T. HUGHES.
Special Dispatch to The star.
NEW YORK. January s.-The first
week of the new year witnessed the
most active bond market since last
Spring and a higher average level ot
quotations than anything recorded
since 1918. The strength of the mar
ket has been surprise even to those
who were most optimistic about the
investment demand. Prices for al
grades of securities have moved up
ward. but with the largest gains in
the higher yielding obligations. foreign
and domestic.
The question Is constantly asked
where all the money comes from &c
absorb the new offerings and at the
same time maintain prices for out
standing bonds. The answer lies in
the constantly increasing wealth OF
the country. II is tn s steady &C
emulation of capital insistent on en-
ployment that has pushed UP invest
ment prices to record heights. The
January disbursement of; interest
and dividends broke all records and
this money coming back into the mar
ket has been the foundation of the
Advance. AS events show, the rein
vestment demand has not been dis
COuI1teu IN DeCSnlDeT as II 50 ulbNll 49,
Savings Banks Figures.
Then, too the savings banks re
turns are Illuminating. Statistics
given out this week by the American
Bankers Association showed that the
total on deposit in all kinds of savings
institutions in 1925 was one billion five
hundred million dollars more than
that on deposit in 1925. Lest the reader
think there is an error in this figure.
.let it he said that. the aggregate say
ings accounts now are S24696 1871 oe,
or an average of S2l1 for every man.
woman and child in the country. The
Institutions which are. intrusted with
the care of this huge sum are perforce
constant buyers of securities.
Is il anv wonder then that invest
ment securities are easily absorbed?
Is it not also reassurins to those or
us who have been concerned about
the squandering of the national In
come in installment buying?
The money outlook continues to in
dictate lower rather than higher rates.
The only cautionary signal is the in
crease in brokerage loans and that is
not yet regarded as significant In
view of all the other tendencies. An
unreStrained- speculation for the rise
in the stock market would. OF course,
absorb credit. but in the present tenn
per of Wall Street any such develop
ment is unlikely.
Federal Reserve Statement.
The weekly statement Of the Fed
eral Reserve Banks shows increases
in reserves and decreases in holdings
of discounted bills. The reserve ra-
ito for the system as whole -
slightly above what it was week
aRo, and what it was in the CORE
spending week a year ago. AS Tar as
the showing Of the member banks rs
concerned. the trend Is toward utlilz
ing. funds released from commercial
loans. in the bond market. Commod-
ity prices are not much changed on
the week, but they are nearly per
cent down. from what. they were
year ago. All these conditions point
So sustained support for investment
securities.
rri1rninr to the features of the week
IN sfsna market. the demand for dhe
hfrR Welding foreign dollar obligations
stands out above anything else. Prices
for fhis group as whole now stand
higher than at any time since trading
in them was initiated after the war
New high records for individual Is
s,les have been numerous througnout
ths-49iSt. In this development French
ohaisations have led the way, largely
because most of them are still selilhs
af1f4yeig far enough below the caliapie
rrices TO admit of substantial addi-
tiorfal appreciation. This possibility
cf SPECULATIVE profit on the principal
combined with the high current IN
come at the market proved irresisu'
bic.
Mono allsble Bond Preference.
That the room for fresh advances
vasAan important factor Is aouhaaneis
demonstrated by the preference &C
corded the non -callable bonds when
exer there was any choice. There
a 60 not many of these high yleldlhg
foreign bonds which the provisions OF
the loan permit of running TO ma
t,,ritv. most borrowers having taken
the nrecaution to stipulate price AT
which they might redeem their oonga'
t;Srs in case their credit and the
state of the money market allowed.
hat such as they are they are eagerly
stn,ght after. French Republic Ih2s
are an illustration. This Is enufely
non-callable and it sells on lower
Weld basis. less than per cent thah
Other IGilAIls OllhehtAC1i-
The most important new Financing
of the week was the $60,oo0,00O. in
New York City Al per cent corporate
stock. The entire issue was disposed
Of TO one banking syndicate at
price to net the city about All per
cent md the syndicate sold the bonds
ia. Investors within IS hours on a
slightly lower yield basis. That so
large an amount should be placed SO
promptly notwithstanding the appar-
entity unattractive return simply goes
TO show the confidence that the tn
yestment community has in the long
range security. outlook and the real
ization of the fact that steadily de-
creasing amounts of Liberty bonds
outstanding will make for the en-
chancement in value OF high grade
municipals. Another factor is the tax
exemption quality of the municipal
bond which gives it an advantage
over taxable corporate bonds more
than sufficient to compensate for the
difference in price.
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