Evening star., 1927-05-08
BOND VALUES RISE
IN WEEKS TRADING
Superanundance of Money Is
Mainstay of Market-No
Change in Sight.
BY GEORGE t. HUGHES.
Special Dispatch 10 The Star.

Special Dispatch TO The Star.
NEW YORK. May This week
has been one of rising prices in the
security markets just as the week
before was one in which declines
predominated. AS far as specula
tive stocks go the popular eXplana-
ton is that the technical position
has been improved by the break III
the closing days of April and that a
renewal of the advance was in
order For the bidding up of the
better grade of investment stocks
the ease in money and the diversion
of funds from the bond market was
held to be responsible.
Probably both of these eXplana-
tionS are more or less correct. The
reason for the generally strong mar
skets is not so important as is the
outlook for the future. With regard
TO the stocks the rapid improvement
this week must have cancelled much
of the betterment in the technical
position already referred to. Specu-
lation in the shares picked ou1 for
leadership has become bolder as quo
tations went up, and to that extent
unsafer. There has been some i'm
proyement in the business outlook,
but hardly enough to warrant the
change Of attitude on the part of the
speculative fraternity as eNempli-
hs~ ip the stock market.
Flood Damage Extensive.
The flood damage in the Mississippi
Valley, il is now hoped, viii not prove
, as extensive as had been feared
earlier. but il is extensive enough.
Railroad earnings are good, but there
is evidence that increases in gross
hpipCr SaNyad
same proportion as earlier in the
year. The effect of wage increa ses
and of heavier payments on account
of taxes has been to cut down the
amount available for dividends. The
public utilities continue TO report
larger revenues. but there is a limit
to increase even in this field. The
industrials situation is very much
mixed. The leaders III the automo-
bile industry have only optimistic
statements to make. but some of the
manufacturers of accessories are not
so confident.
1t has not escaped notice also that
the present stock market is able to
I reflect the unfavorable as well as the
favorable outlook not only as between
different groups but within the
groups themselves. AS the speculator
puts it, there has been bull AMI
bear market in operation in stoc ks
simultaneously. This week the bulls
have had all the best of ii. 1t is
more than possible that the coming
week viii have another story TO tell.
Money Market Mainstay
Coming down now to more funda-
mental matters. the mainstay of the
market is still the superabundance of
nd fK, Ln% ,y,,,~
change is in sight. The weekly state
ment of the Federal reserve banks
showed a drop in the reserve ratio
from last week of a point and a half.
but the figure is still 31z points above
where it was year ago at this time.
Gold reserves of the system have
made another new high for the year,
which means the highest since 1924.
Call money is back to the 4 per cent
rate and time money and commercial
paper rule as easy as ever. As long
as this continues no major downward
movement in securities is at all likely,
whatever the temporary fluctuations
may be.
In this connection great interest is
taken in the problem refunding opera
tions of the Government. If the Sec
Ond Liberty loan is TO be called for re-
demption next November, the Secre-
tary of the Treasury must give notice
TO that effect by May Is. Whatever
he decides to do will have a bearing
on the investment situation. All Gov
ernment bonds have been very strong
this week. Quotations are creeping
back TO the high points made in
March directly after the quarterly
financing. The suggestion has been
made that reduction in the redis.
count rate would make it easy for the
treasury to market new Offering.
but the course of the bond market now
indicates that no such move is neces.
sary.
Foreign Dollar Issues.
Elsewhere in the bond market
strength in foreign dollar issues has
been the feature of the week. Warn
'lngs from high banking quarters
against recent excessive competition
for the privilege Of making new loans
10 foreign countries and industries
have not disturbed the market for ex-
lstin~ bonds Rather these older is
sues h~ve been bought perhaps on the
theory that if the output is to be
limited. they will be the more vau.
able. Then. too. whenever there is any
doubt about the course of prices in
stocks and whenever investors feel
that domestic bonds do not give them
the yield to which they think they are
entitled, there is always a turning to
foreign securities.
New bond issues continued 10 be
marketed at progressively lower re-
turns TO the buyer. Illustrative of the
tendencies OF the day is the announce
ment that a large industrial company
has decided to redeem it's preferred
stock paying a Z per cent dividend
and 10 rpnf9rp il with q Z ner cent
debenture bond. This, of course, re
suits in a substantial cutting down
Of disbursements that come ahead of
dividends on the common stocks. 1t
also indicates the confidence in the
future now so widely felt by indus
trial executives in that they are will
ing to substitute a fixed charge for
contingent one in their capital
structure