Evening star., 1928-05-20
HIGH MONEY RATES
SEND BONDS DOWN
Market for Gilt. Edge SeCuri'
ties SufferS-NeW Issues
Also Are Lighter.
Rreclal nisrateh to 1,l,e star.

Special Dispatch to The star.
NEW YORK, May le.-The pressure
cs high money rates against bonds was
more evident this week, and at the same
time the unsettlement in the stock mar
ket had a tendency to disturb those is
sues that synlpathi2e with speculative
conditions,
The average Of the bond market was
year, being affected more by the heavi-
ness in the standard { and 4l2 per cent
rails and iniuStrials than by the higher
coupon obligations.
II is apparent that so long as time
money rates remain well above per
cent the market for gilt-edged Secur!-
ties cannot improve. as they have been
giving Yields ranging from $40 per cent
to 4.4o per cent The effect OF this is
showing each day in the quotations for
United States Government issues, THIS
week the fourth las have sold ABOUT
points below the best Of the year, the
iirst AIS are off about l Il points, the
Treasury Is around 1o9A compare with
1llSs and the 33sS have been under
I06ls, against 1856 earlier in the sea-
son.
Rail Bonds Lower.
Underlying railroad bonds are from
70 81, points below the levels reached
when money was much easier some
months ago, and public utilities OF rela-
lively the same grade show declines OF
. to 2i2 points.
The foreign list has also been heavy
in spite of the fact that the average re-
turn on the active members Of it is stu
well above the money rate. THIS oi-
vision of the market has come into
closer competition with the speeuIation
sn stocks than any other, as 1t is re-
caried as having a speculative char
acter. and during the period OF large
profits in industrial and public utility
Shares the public has been neglecting
the foreign issues which it previously
had bought not only for appreciation
but for the handsome income TO be de-
rived from them.
Last weeks mild disturbance in Japa-
nese issues. owing to the war Situa-
tion in the East. has been followed oy
q general recovery. so that they are
now back within about point OF their
previous level This recovery Will be
helpful in connection with the distribu-
ton of a new Japanese government
issue of 500 O0O. 900. of which half viii
be placed in London and in New York
es soon as there is satisfactory inn
provement In the relations between
Japan and China.
New Issues Tighten.
The difficulty in selling bonds while
speculation in stocks is so widespread
and money rates are rising accounts for
the slowing down in the volume of new
issues. Dealers find that their regular
customers have temporarily lost inter-
est In investment bonds and cannot be |
persuaded to discuss the merits of new
offerings or Of older issues that have |
attractive features either Of income or
possible appreciation.
This weeks offerings included be-
tween $50 900 900 and $35, ,000. 900 of a
scattered list of bonds of small public
utility properties. about the same |
amount represented by the obligations
Of industrial and real estate companies
End between $25 900. 900 and 30,000, 900
bf common and preferred stocks of in
testment trusts There was also the
unsold portion Of SIS. .000. 900 Associated
Gas Il Electric Co. 5 per cent de-
bentures. of which over rs per cent has |
already been placed through exchanges |
for securities OF this company and its |
subsidiaries and si7.000. 900 Of Detroit |
& Canada Tunnel Co. first mortgage 6s |
and So per cent convertible debentureS. |
Preferred Stock Demand.
There continues to be a widespread |
demand for preferred stocks. In spite |
Of the accumulation Of such issues by |
private investors, institutions and In |
vestment trusts. there are many that |
AFFORD Rood return and are well |
under their call prices. To meet the |
present situation new issues Of pre-
4erTed stocks are being created. eSpe- |
cially By some Of the newer public util- |
tiles. and are being given speculative /
as wen as investment values by the at /
tachment OF common stock units or the /
privilege OF conversion on . sliding /
scale.
For years the preferred stockholder |
has been insisting that he should have |
the right 20 participate In the equities |
Of his company. and the common stock /
bonus Is the modern way Of acknowIedg- |
Ing the justice Of his claim.
II new issues are not selling. either /
because they are too high in price or /
because the public is too much inter- |
ested at the moment in stock specuia- |
ton. II must follow that the supply Of /
bonds In the market is steadily in /
creasing. This is the actual situation |
n&AA 1lC btAcA ~ Rlsf1& investment /
dealers considerable anxiety. Condi- |
tons are not by any means so serious
In this respect az they we're a year ago. |
as the volume Of new financing last
Winter and 50 far this Spring has been
smaller than II was then and the per-
centaRe Of refunding operations to the
total Of new stocks and bonds hoated
3s materially higher.
gyndicates Have Bonds on Hand.
There are. however, quite a number
of syncicatek With bonds on hand and
as these syndicstes dissolve II is quite
probable that the prices Of their issues
VIII decline as they did last June and
throughout the GUNNER, or until they
reach tie basis at which they appear
attractive 70 the investor. This is one
o. the features Of the investment Eitua-
ton that has 10 be faced in spite OF the
anpleasantness and II is aggravated by
the necessity for keeping money rates
high In order 10 bring stock market
speculation and stock prices back TO q
sensible basis.
The az per cent reciscount rate IN
New YORK this week and the apparent
anxiety of the Treasury officials con-
cerning their refunding plans for June
IS n1ahIritieG and for the remaining
United States Liberty third si4s, tend
n eK0azFFaSs those with bonds "
80 gszkl.a Sx k4s