Evening star., 1927-04-10
PROGRESS SMALL
IN BOND MARKET
Overflow of Investment Cap
itaI Into Stocks Noted Dur
ing the Week.
BY BYRON sELLE1.
Special Dispatch to The Star.


Special Dispatch TO The Star.
NEW YORK. April 9.-Overfiow OF
investment capital from bonds into
stocks has been the outstanding fea.
ture of the weeks market. Investors
dissatisfied with the return obtainable
on bonds at present prices have been
turning to stocks The stock average
price level has consequently gone into
new high ground. Bonds, on the
other hand, while still at approx
Tnately the highs of the movement,
have made little progress.
There are large buyers of bonds,
such as financial institutions, which
are restricted by law TO this class OF
security. These viii always be Gus
toners for new offerings, as well as
seasoned issues, but the buyer who
has liberty of choice seems to prefer
stocks under present conditions. This
buying, however. has been highly dis-
eliminating. Railroad shares and
some utilities have been the favorites.
But when it comes to industrials.
equities and businesses about whose
outlook there is the slightest doubt
they have been passed by.
The reason that the railroad and
utility stocks have been so favored
is not only the present relation be-
tween earnings and prices, but the
realization that sagging commodity
quotations do not affect these as they
do industrials. Then, too, there is
room for higher dividends, certainly in
the railroad list and probably in the
utility group.
The Railroads Share.
In the case of the former it is not
necessary that net income increase
before larger disbursements to share
perity simply maintains itself, 81
larger part of it can be passed along
to the partners in the business.
Therefore, the fact that the average
Yields on 10 representative dividend
having stocks are about 5.l5 per cent,
conpared with 4.40 per cent for 10
high-grade railroad bonds, does not
fairly measure the superiority or the
stock investment over the bonds. A
few dividend increases in the railroad
stock list would bring up the average
there, whereas, of course, there can
not be anything similar in store for
the bondholder.
Notwithstanding this favorable at
titude toward stock investments, new
financing during the week has largely
taken the form of bonds. Public util-
tiles have been conducting successful
customer ownership campaigns for the
distribution of their preferred issues,
but the appeal to the outside investors
has for the most part taken the form
of a fixed interest rate bearing obliga-
ton. New bond offerings on the week
totaled nearly $500 100000. making 1t
the third highest week of the year.
Land Bank Issue.
The largest offering and the one
which brought up the total was the
500 ,O00, 900 Federal Land Bank issue,
carrying a Az per cent coupon and Of
fered at a premium TO yield the buyer
4.I0 per cent. In large part this rep
resented the refunding of a Az per
cent issue and so was not disturbing
factor in the market. The bonds went
very well, the tax-exempt feature be-
ing the attraction. Only in the Sc
curities of the Joint Stock Land
Banks can a larger yield be had com.
bined with freedom from Federal tax
alton. Then; too, the advance in
corporate bonds, so that 4 per cent is
TO be had only rarely on strictly first
grade descriptions, makes the Land
Bank issues more interesting.
In the foreign field the principal
event was the marketing of a $780,
000, 900 Jugo-Slayia loan. This was
offered on a basis to yield the investor
7.60 per cent. 1t carried a z per cent
coupon and compares with the per
cent obligation of the same country
originally sold in 1922 and now quoted
on the Exchange to yield about IT'S
per cent. Investors are willing TO
take a slightly lower return on a new
issue selling at discount rather than
buy an old one quoted at a premium.
Seasoned bond issues have reflected
the same sort of selecTive buying that
has been so evident in the stock mar
ket. There is an abundance of cap
ttai. but it is not assuming unneces-
gary risks. This is true in the foreign
as it is in the domestic opportunities.
Japanese dollar obligations have been
sagging because of the concern over
the serious Far Eastern situation.
At home some of the bonds Of the
packing companies have reflected the
unsatisfactory condition in that in
dustry just as the stocks have done
in greater degree. There are only
q few automobile bonds-that great
business having financed itself almost
entirely by stock issues and in this
field also the investor wants only the
best.
High Grade Preferred.
Surveying the investment field as
EE
weight to safety and return alike.
are the high-grade preferred stocks
In this group there are some curious
discrepancies. Atchison preferred
paying IS sells well above par. where.
as United States Steel preferred pay
ing 81 sells at 1873. If the latter were
to be quoted on a yield parity with
Atchison preferred it would have to
advance over points.
The comparison with bonds is al
most az striking. There are very few
bonds which give per cent with the
same assurance of continuity of in
come as do the best of the preferred
stocks, such as United States Steel,
American Bank Note, Consolidated
Gas and many others that could be
named. This is a condition which
viii right itself in time but mean.
while it is one that the conservative
security buyer will find it to his ad.