Evening star., 1927-10-30
Trend DOWNWARD
IN BOND MARKET
Little Cause to Believe
Weeks Action Is Anything
But Temporary.
GEORGE r. HUGHES.
Special Diapatch to Tho Star.


Special Dispatch to The Star.
NEW YORK, October eth,
trend in the bond market this weel
has been slightly downward. There
has been no important liquidation anC
) no real weakness, but on the Other
hand the price average is lower thar
it was a week ago.
For this there are two or three
reasons. The weakness in the stock
market has probably affected sym
pathetically some of the more spccu
lative bonds. This however. is rela
lively unimportant factor. OF greater
influence has been the competition be
tween new offerings and seasoned
issues,s while in the foreign list the
heaviness in German obligations has
been a disturbing element.
Causes Only Temporary.
There is no reason to believe that
any of these causes are anything but
temporary. Over the longer period
the trend in bonds is still upward. II
will not be as rapid as it has been in
the last year or two, simply because
, prices now are approximately at the
postwar peak and yields are CORE
Spondingly small. There is not the
room for price appreciation that there
was. Nevertheless, money continues
abundant and must find employment.
For the moment stocks are not in
favor, and the stock market is not
making such large acquisitions on the
credit supply as it was. Witness the
drop in brokers loans as reported by
the Federal Reserve Board on Thurs
day. The total now is down to the
S,P fliC month The
decrease has had no effect on stocks,
but it is a favorable development as
to bonds.
As to the new offerings the total
of the week was 1S9,115,000, against
/, $267 ,30S,500 a week ago. There is a
considerable falling off but it is not
significant as far as the market is
concerned, simply because there are
plenty of bonds still to be perma-
nently placed from offerings earlier
in the month. incidentally, new bond
issues in October have establisntd d a
new monthly record for peace-time
financing, the sum amounting to over
$750, 100000. These will have to be
absorbed before the general list is
in a position to resume its advance.
Difficulties i'm Germany.
With regard to the German situ-
a more general realization of the
difficulties which that country faces
in providing exchange sufficient to
, pay both reparations and service on
I fits external loans. This is a coEdi-
ton that has been foreseen by eco
nomists all along, but their views
have been dismissed in the past as
academic and theoretical. OF late,
however, the bond trading public has
hod 5ho mo hrn1rtr1t fa 9ffpn-
lion with a resultant shading of prices
for German dollar securities. No one
doubts that Germany is planning a
showdown on the r9parations Ques-
tion as the time approaches for maxi
ing maximum payments. This will
bring the whole matter to a head,
but until then the publicity given
the subject has taken the edge eff
investment appetite Tor German
bonds.
Only a few of the new offerings
have been particularly interesting.
Probably the most important was
the financing by the Great Northern
Railroad, which sold S26,000,000 of
general mortgage bonds with a Az
per cent coupon only Il point below
par. This is another milestone in
the Improvement of railway credit in
general as we'll as that of the
Northwestern roads in particular.
Issues Tell the Story.
AS 1t happened, also, the successive
issues of the Great Northern under
this mortgage tell the story graph
ically. In June, 1921, that road sold
sll5,ooo,oOo Of Is due in 1895: In
February, 1922, it marketed $50 ,000,-
600 Of 51as; in May, 1924, $4,000, 900
OF 5s, and in June, 1926, $4,000, 900
in 4iss, and now in October, 1927,
100000 more of the AIS. Last
years issue of 412s was offered at
v 81, and this weeks offering was priced
at 99, so that there has been no in
terruption in the progress toward a
lower return to the investor and bet
ter terms to the borrower.
OF the other new bonds there need
be mentioned only the $30,000,o0O
Shell Pipe Line Corp. per cent debs.
The present status of the oil industry
necessitates extensive financing. In
this particular case the object is ex-
pansion of pipe line facilities into the
Southwest. Other companies are like
1y to borrow for the purpose of carry
ing oil bought at prevailing low prices.
In any event, discouraging as the oil
outlook seems to be. these offerings
are likely to attract the shrewd in.
vestor. 1t has been noticed all the
week during the acute weakness in
the stock market that the oil shares
have been relatively steady. While
there is no immediate turn for the
better in sight, there always comes a
time when everything unfavorable
has been discounted.
Paying for Extravaganza.
With regard to the stock market in
general, there is little to be said ex-
cept that the speculative eXtrava-
gances of the Summer are now being
paid for. 1t is true that some of the
corporation earnings statements, not
ably that Of United States Steel, have
revealed the unsatisfactory conditions
in industry that have been suspected
all along but allowance should be
made for the fact that comparison is
now being made with the exception
ally prosperous year of 1926. There
is no pronounced depression in trade
nor Is there likely to be.
Meanwhile money is as abundant as
ever. II the so-called investment
stocks were desirable purchases two
months ago, they must be more de
sirable today when they are down any.
where from 10 to 80 points from the
high of the year.