Evening star., 1927-10-23
TRADING TRANQUIL
IN BOND MARKET
=
Prices Shade Lower Than
Week Ago, Due to Heavy
New Offering List.
BY GEORGE T. HUGHES.
Special Dispatch 10 The Star.

NEW YORK. October Z2.-while
the stock market has been performing
spectacularly. the bond market of the
week has been moving TRANQUILITY
along. Prices are a shade lower than
they were a week. ago, but that is
because of the competition of new
issues and not from the effects of
overbuying. as in stocks.
New bond offerings this week totaled
over 1857 100000. making it the Sec
ond largest, week of 1927 in this re-
spect. Tne record week was that
ending February 4,twhen there were
more tran 1927 900. 900 of new issues.
A wee,R ago the output was almost
Sci. 900, SO that the aggregate
of the last two weeks is more than
SASS, ,000, 900.
These are large sums, even in these
Gays, and it was not surprising that
the advance in seasoned issues slowed
up. The effect is not likely to wear
off IN week or two, either. 1t will
take a longer time to place perma-
nently this great amount of new
bonds. Some authorities have been
predicting a period of congestion in
the investment market similar to that
eXpeI fenced last June. This view.
however. Is not universally held. For
one thing, there is still superabun-
dance of money seeking employment
and there are as yet no indications
that the supply of investment media
has outrSln the demand.
Interesting New offerings.
The weeks new offerings have had
some unusually interesting features.
In the first place. low coupons have
been the rule on all domestic bonds.
81
sfuirement with securities yielding the
investor from Az to about 4% per
cent. The Edison Electric Illuminat-
ing Co. of Boston sold 40.0000 900
notes, $50. 100000 running three years
with Az per cent coupons and $10,-
10000 of tkem running one year with
per cent rate.
The newly organized New York
Power & Light Corporation marketed
30-year mortgage bond with Az
per cent coupon at price to yield less
than AIS per cent. Only a year or
two ago, financing even by the most
successful of public utilities would
have been impossible on any basis SO
favorable to the borrower.
Along the same line next week the
Federal land banks are scheduled to
offer $50, ,000, 900 of bonds with a
per cent coupon. the lowest rate since
the establishment of the system.
Finally. conditions of a quarter century
ago were recalled when the Morris
& Essex Railroad sold nearly $4,000.
900 of its first refund;ng 3R per cent
mortgage bonds. The return to the
buyer of this issue was only AIS per
cent Strictly speaking. however, this
is not new financing. but only the of
fering OF an additional issue of treas
ury bonds originally brought out in
1900. Needless to say, investors do
not look kindly on the reduction of
their income that such purchases
represent. but it is the trend of the
times and will have to be accepted.
Biggest Power Issue.
The New York Power & Electric
Offering is interesting also as being
the largest electric light and power |
offering ever made, topping by a |
small margin, the Associated Gas & |
Electric issue of April, 1926. The lat
ter by the way. carried 5ia per /
cent coupon. showing the progress
that has been made since that time
toward lower interest rates. There
have been larger utility offerings in
the past. but they have been in the
telephone file. where the American
Telephone G. Telegraph reigns su-
prenle.
Another feature of the New York
Power and Light bond is worthy of |
comment. That organization is a |
holding company, but provision has |
been made for retiring all the under /
lying bonds or practically all by /
January 1, 1929. This development /
in holding company financing is COM /
paratively recent. but is of real ad- |
vantage TO the investor, If the obli- |
cation of a holding company is with I
out prior liens it is. of course. as |
good as that of the operating COM |
panies and has the additional attrac- |
ton OF a much bette market. That |
is now the trend in railroad financing |
also.
Risk i'm Foreign Bonds.
Turning to the foreign field the
contrast is striking. The most i'm
portant offering of the week here was
the Republic of Poland stabiiization
loan. 1t consisted of $47.000.900 20
years rs at a price to yield the buyer
7.S6 per cent. This is high enough
TO satisfy the most diligent seeker
after a high return. The trouble is
that there is an indefinite risk in all
these foreign bonds: otherwise the
rate would not be so high.
1t is q curious commentary on the
claim SO often made that the strength
in the stock market was primarily due
to investment demand, that stocks
should have had so violent a break
the very week that all this large vol
Iirne Of bonds was being marketed, II
goes to show not that investment
demand had no part in putting up
prices for stocks. but that specula-
tors had been trying to ride along
on the crest and that they were un-
prepared for the sudden recession.
Doubtless when the technical con-
dition OF the stock market has been
restored, Investors will again be found
buying the better grade of stocks.
Before that time. however. further
readjustment is probable. Neither in
vestors nor spectators are accus-
.omed hastily 10 enter a market which
has shown itself as sensitive tn