Evening star., 1927-11-06
GOVERNMENT LIST
FEATURE IN BONDS
Situation as to New Issues
Working Out Better-Many
4 Are important.
By GEORGE T. HUGHES.


Special Dispatch to The Star.
NEW YORK, November 5.--The
most interesting feature of the invest
nent market this week has beer
. strength in United States Government
loans. Three OF the Treasury issces
nave sold within the past few DAYS al
fne highest prices in their history
bringing the yield TO the investor who
buys at current levels down to around
34 per cent. In fact. one issue. the
Treasury 3$s of 1943-47. have beer
selling on less than 3A per cent
basis.
Two or three deductions are TO he
drawn from this demand for Govern.
ment bonds. One is that the new
Offering in connection with the retire.
1nent of the second 4A Libertys on
November 10 will be just as success.
lul as all the other Government financ-
ing IN recent years. Another is that
me progressive reduction in the
amount of Government bonds out
standing by that much enhances the
value of the remainder. There is no
investment medium comparable to
tnat of Government securities for
temporary corporation surpluses.
There is no substitute for Govern
ment bonds for this purpose. and no
the bond market. this demand is eX-
pected to persist.
Public Debt Reduction.
Bearing on this point it is interest
ing to observe that the public debt
has been reduced $10S.925,073 in
October, and sI.051 500, ,191 for the
year ended October 81. These are
the official figures of the Treasury
Department. The approximate saving
in interest annually is around S42-
0O0. 900.
With the second Liberty loan out
of the way, the next problem that
confronts the Treasury Department
will be the maturity of the third
Liberty loan, of which s., ,147 $4,000
is now outsta nding. How that VII be
handled cannot. of course, be predicted
at present.
The third inference from the
strength in Government bonds, name
", that it foreshadows equally sus-
tanned strength in the general bond
market, is not so universally accepted
Government bonds are in a class by
themselves and yet it is an encourag-
ing development. AS far as the cor
poration bond market is concerned,
that, too, has been strong this week
for the very highest grade of obl1ga'
tions. The average show slight fall
ing off from a week ago, but that is
because they include middle and sec
ond grade descriptions. Railroad mort
cages selling on a AIS and 4.70 per
cent basis have been in demand in
excess of the supply.
New-Issue Situation.
Meanwhile the situation as to new
Issues has been working out better
A fox
looked as if another period Of con-
gestion such as existed last June was
threatening. That this danger has
been averted is largely due to the
management of the investment bank
ing community in regulating the flow
Of new financing. In mid-Octoper,
new offerings at one time were at the |
rate of almost a quarter of billion /
dollars a week. This total has been |
gradually declining. SO that reason |
ably good distribution has been effect
ed of most of the bonds.
All this refers to domestic financing.
In the foreign field the, discussion of
the German situation still is being
carried on with animation. The ques-
ton as yet unanswered is whether
reparations or service on Germany's
external loans has the first call on |
the exchange market. A prominent |
British banking house. apparently ,
speaking with authority. takes the |
position that Germany must be allow !
ed to find the exchange to meet in /
terest and sinking fund on its foreign |
loans regardless Of whether there is |
sufficient for the transfer of repara- |
tons.
Undoubtedly the French govern. |
ment takes different view. It has |
been suggested this week that all /
parties to controversy get together /
and come to an understanding on the |
subject. IL that comes to pass. an OBJ /
stacle to further German nancing in /
the United States will have been re- /
moved. German dollar bonds have I
been somewhat steadier this week, |.
showing that the market is not un- /
duly concerned.
Conform TO New Standard.
Domestic issues Of the week have |
conformed to the new standard. The |
Philadelphia suburban counties Gas |
& Electric Co. sold a mortgage bond |
with Az per cent coupon running 80 |
years at a price only 2 points under
par.
The Az per cent rate now is the ac-
cepted thing for the primary obliga-
tions of the most prosperous utilities.
Tn this case underlying bonds with
ntg1er coupons nave DGSH TttHeu,
which is also now the rule. The
other important issue was that of
s45. 600, 900 Cities Service Power &
Light debenture 51as, running %
years. priced to yield 5.65 per cent.
The proceeds of these go to simplify
the capital structure of the company
and its subsidiaries. This kind of
financing, in the long run, is in the
interest of both borrower and lender.
How much of the improvement in
the stock market has been due TO the
natural r,bound from the selling Of
the preceding week is impossible to
say. Some upward reaction would
have been normal in any event. 1t is
plain. however. that more attention
fs being paid to the trade position. and
there seems little chance Of repeti-
ion of the extrayagant bidding up of
prices that characterized the market
earlier in the year. The one group OF
socks which seems i'm the best posi-
ion TO respond to any change for the
letter in the industry represented is
ne oils.