Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-06-08
j. S. SETSEXAMPLE
IN BOND INTEREST
New Treasury Certificates
Pay Rate in Line With
Present Conditions.
Special Dispatch to The star.

NEW YORK, June 8.-The United
States Government has set a good ex-
ample to private distributors of bonds
in fixing a rate on its new Treasury
certificates high enough to be attrac-
tive to the public that buys this kind
of paper and to insure its success.
The rate of SIS per cent is slightly
above the market for similar Govern
ment certificates. In this respect it
differs from earlier offerings, which
were below the market and conSe-
quently met poor reception. The
$475, 100000 Of 434 per cent certificates
offered last March went poorly. In
fact. it has been claimed that they
were forced on the banks at the time
against their will. Today they are sell
ing at 99l4 compared with the issue
price of 100 and have been even lower
recently.
Difficulty of Market
One of the difficulties in which the
market tor both domestic and foreign
investment securities finds itself today
grows out of the unwillingness of dis
tributors of bonds to accept current
market conditions and to make new
issues attractive enough in price and
yield, compared with old issues, to COM
pei their distribution. The effect of
have declined sharply in the past year
when SyndicateS have been dissolved
and which even now remain III SUBJ
Stantial amounts in the hands of the
underwriters. What the markets Tor
both domestic and foreign bonds most
need at present to give them stability
Is a good mortgage issue offered ut a
figure that may not mean much profit
10 the underwriters. but will warrant
an immediate premium on 1t for the
buyers and guarantee the maintenance
of the original price.
The rate of SIS per cent on the
$40O .O0O. 900 OF nine-month certificates
of indebtedness, for which Subscrip-
tons are being taken, is the highest
since 1921. 1t has been made necessary
by the general credit conditions, which
in turn have suffered from the abSorp-
ton into speculative markets OF such a
large volume of bank funds. Conse-
ouently the Government, like all other
borrowers, has been penalized, and Is
now paying for new money above the 5
per cent Federal reserve discount rate
for the first time i'll many years.
In November, 1927, $500 900 900 of
seven month certificates were sold by
the Treasury at 31s per cent. This
was during the period of cheap money
following the reduction in the Federal
reserve rate i'll August of that year to
312 per cent. In December, 1927. new
certificates issued brought a rate of 81
per cent. IN the following March
$3.50 ,OOO, 900 of nine-month certificates
were sold on a basis Of between ga and
33s per cent, and in June, 1928, at 3Ts
per cent and per cent. Last October
after the Federal Reserve rate i'll q
majority of the reserve districts had
been advanced TO per cent the
Treasury was compelled TO establish a
rate of 4% per cent on its paper ana
to repeat it again when it borrowed In
March of this year.
Rate Believed Hig sest.
1t is confidently expected that the
rate on the new issue of Treasury pa
per of SIS per cent, comparing with 31s
per cent in November, 1927, will repre-
sent the extreme penalty to the Gov
eminent Of the tight money period
which began q year and a half ago.