Evening star. [volume] (Washington, D.C.) 1854-1972, 1928-07-01

! 89l2, ChilCS Co. IS, $500. New Haven
4los. 9il4-89l4 Morris e. Essex 3i9s,
| $3.50: New York Power e. Light Al Is,
/ a6-92: Southern Pacific 412s. 1884 81
! Pacific Gas {; Electric 4i2s. 99-97L:
/ Metropolitan Edison Abs. 99i2-97i3:
! American Gas e. Electric IS. lol -a6i9,
( and Rock Island Alps. $751;. There
! are half a dozen others such as Du-
quesne Light 4 IS. Philadelphia Electric
4 l2s. Public Service of New JERSEY Elec-
t trio e. Gas q ,s. Union Pacific 4los and
Shawinigen Water &, Power AIS, which
/ are still either slightly above or slightly
below their issue prices though off
| from 3 to points from the quotations
at which they sold several months ago.
An Overcrowdcd Market.
| The conditions that influenced the
decline of about five points in the aver
/ age of the first group of railroad bonds
/ also we're at work in reducing the level
of quotations for the second group
There was this difference, however,
/ the railroad bonds were in most cases
closed mortgages and had been we'll dis
| tributed, while in the second list many
of them represented large open mort
! cages from which would flow additional
bonds. and the new issues had not been
we'll sold
| Obviously the issuance of bonds has
been overd0ne in the past nine months.
This applies particularly to the amount
brought into sight Furthermore due to
/ intense competition for foreign loans on
the part of the different large banking
/ groups, prices have been paid that were
not in line with those of older issues by
i the same borrowers. The public, which
has a keen sense of values. has been
unwilling 10 take one when it could get
/ the other to better advantage Eventu-
ally We may get bac' to interest rates
! that will warrant more Az per cent
| bond Issues. and perhaps. as has been
/ suggested, the day is ahead when 1t will
be possible to sell 4 per cent corpora
| ton obligations at par 1t will require
| time and the absorpticl of large mass
of undigested bonds. however, to bring
/ this situation about.
| Encouraging Factors.
| Encouragement Is to be found in SIM
liar market conditions Just year ago.
Then there were other 4la and 434 per
cent railroad bonds that were going
| begging because they had been priced
| too much above the market. Suisse
quently they were all digested under the
| Influence of a 81, per cent money mar
ket, and those who bought them last
| Summer had established verv salts
! factory profits before the end of the
| year.
| 1t is fair to assume. therefore that
| the new public utility and foreign gov
! eminent Az per cent issues that have
| been acting so badly during June may
/ also make profit for those who have
| had the courage to buy on scale down
after free market had been estab-
| lished for them.
| Their course, however. and that of
| the entire bond market, will depend
| somewhat on the volume of new secMri-
| ties issued in the next few months. The
| situation today is that great many
| + ,nds are still in first hands; that is,
| the dealers have not been able to dis
| tribute them to the public This will
undoubtedly postpone many new issues
and we may expect rather dull period
in the matter Of new financing for the
next two months. They came along so
rapid during the Spring that they
could not be absorbed, and their APP
pearance conceded with the great spec
ulation in stocks which occupied the
entire attention Of the public that had
money to invest In the five months to
May 81 the total amount of corporation
bonds, stocks and notes offered was In
excess of 4,000.000.000. To this must
be added another 81 ,0C0. 900. 900 of for
eign government bonds and of munich
pal bonds June will increase the total
by at least 00,000,000 for in one week
alone this month the new issues aggre-
gated nearly half this amount.
Not all Of this represents new capital.
The refunding of railroad and public
utility securities has been an active
feature Of corporation financing for the
past year and half so that of S3628,-
100000 of all kinds OF securities issued
In the first four months Of 1923 no less
than 1882 100000 was for refunding
purposes, The remainder had to be
found out OF the saving OF the people
or from the exchange of old securities
for new.
The Money Situation.
The money situation is not, of course,
so favorable 10 the market now aS 1t was
II months ago. On It's action in the
next two months must depend the main
course of prices Associated with It Is
the position of numerous banks through
out the country heavily committed TO
bonds and requiring more liquid funds.
Loans have been made recently, matur-
ing In October, as high as 53t per cent,
There is possibility that the Federal
Reserve rediscount rates may be adj
vanced to per cent II this happens
as measure Of forcing liquidation in
the stock market. II will have the effect
of producing more liquidation by banks
and other Institutions This would de-
lay the recovery In bonds
Then there Is another factor that was
not present year ago and which today
limits the purchases of the savings
banks. This is the withdrawal of a
large amount Of money from these
banks for use IN the stock market !
Banks IN metropolitan districts In the
past three months have had greater
Withdrawals than deposits, Not only
have they had no money to invest but
they have been compelled To reduce
their investment account In order To
meet these Withdrawals,
This Is a condition that the banks
have not faced In some years. II linz
tied them In their purchases of the pub
lie utilities when these became legal |
and has removed one of the strong sup
porting influences In semi -demoralized
market.
Foreign Financing Heavy.
and foreign corporation financing dur
Ing the half year has kept pace with
previous wears There has been some
what different trend TO II. however In
the first half of 1929 South American
and Central American government pro-
vinoial and mortgage bank issues were
extremely popular. There was very
heavy borrowing for the account of Ar
gentina. Brazil, Chile and Colombia, |
The ISSUES OF those republics that had
been stale for long while moved MP
under the influence OF kind of invest
ment demand that is more concerned
with yield than with the absolute Sc
curity Of the Investment. |