Evening star., 1928-05-27
TREND DOWNWARD
ON BOND MARKET
High Money Rates and Un-
settled NeW-ISSue Situa-
ton Are Factors.
speelal nsnatch TO The star.

NkNNtdA AfSANANtA ~ AAC NtaA-
NEW YORK, May 26,-The trend of
the bond market this week has been
quite definitely downward. II has been
determined by the rates for money.
which have been firmer than during the
week previous. These rates emphasize
the spread between current bond yields
and the income return from lending
money on call or in the purchase Of
good commercial paper. So long as
the margin is as great as today there
Will be no incentive to purchase invest
ment securities for other than income
PURPOSES.
The second factor operating against
prices has been the mSettlement in the
market for new issues, This is the
result OF starting them at too high q
level, A number Of them have had
TO come down 10 a parity with others
Of the same sort. This has worked q
severe hardship on dealers who have
been unable to distribute their allot-
mentS to the public. ConspicuouSly
weak have been the various railroad
and public utility and Ala per cent
mortgages. which we're brought out
early in the Spring.
Wabash 4t@s Case in Point.
Cases in point are the Wabash Rail
road AIS. issued at 95i9. selling later
at 96 and then declining to 80: the
St Louis & San Francisco 4l2S. Syndi-
Gated at 81 and falling TO 92l2. and the
Cincinnati Gas & Electric As, the first
power and light bonds to carry such a
low coupon. which were announced as
representing new epoch in investment
history when they came out at 9212
and have since sold at 81. Similar con-
ditions obtained in the several for
eign issues with AZ per cent coupons.
which have moved slowly and are
temporarily protected by syndicate
agreements.
In this respect the market resembles
that of last Summer. New financing
then was at prices ahead Of the market.
It must be said. however. that the situ-
alton eventually worked out satisfac-
torily and all Of the new bonds, with
q few exceptions, sold well above their
original figures If the opinion that
nancy rates over the next few years
are to decline is accurate, the bonds
that today look rather sick viii bring
fair profits to those who have the
courage to buy them now.
Always Special Situations.
There are always special situations
that regulate bond prices more than
money rates or technical market con-
citions We have had one OF these this
week in the New York traction group.
The eight or ten members OF it are
all highly speculative, moving as wide
y as common stocks, depending on the
ebb and nCw Of the movement for high
er fares The application for cent
rate On the subway lines sent them al
hring and the decision Of the Supreme
Court on Monday, putting Of the final
determination Of this case for another
four months at least. cut the founoa-
tons from under those who had built
I'd a bull account on them.
To a much sitEnter degree, the
opinion Of the Interstate Commerce
Commission In the Chesapeake d ONO
case disturbed the market Tor junior
bonds of railroads whose future Is bound
I'D ia the consolidation idea AS some
Of these have been selling quite hign
comnared pyith their return, they were
also affected By the element OF dear
money and by the weakness n spccn-
latiTe stocks.
Decline In Average.
The net result of these movements
has been a decline IN the average price
Of bends this week of greater severity
than IN some months. and bringing II
down Ia points under the high OF the
wear. There have been some evidences
Of q better demand as prices have re-
ceded. particularly IN the tax-ezempt
group and IN United States Govern
naent issues.
Because OF the state of the bond
market there has not been such rush
CT new issues into sight. This weeks
offerings have. IN fact, been limited in
number as well as IN the amount Of
capstal involved. A notable feature has
been the recurrence Of financing for
German municipalities and for German
indugtxials. There have also been ad-
diti0nal issues OF investment trust Sc
cur5ties and some small industrial bond
offerings.
Refunding Of Old Issues.
II Is oE significance that so large a
portion o1 the new financing today rep
resenEs the refunding Of old issues INTO
new ones with either a lower coupon
or lower dividend rate The completed
figures Of April, while showing total
financing Of 81 ,0SO. .000, 900, reveal the
fact that cf this 10 less than 1867 .OOo.-
900 was employed In taking up out
standing bonds and stock Nearly 65
per cent OF the public utility financing
vas Of q refundfng character and SO
per cent Of all Of the railroad tss,Ieg and
55 per cent OF the induStrialg were
shown % have been negotiated for the
same purposes.
A temporary stop has been made 70
this operation by the high rates for
money, for as long as money commands
its present level II obviously win De dif-
ncE1lt TO interest the holders Of a high
coupon bond in one Of the types that
have recently been popular.
Therefore. we may expect TO see some
ek1y1ukaRe In new offerings during the
remainder Of the Spring season,