Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-10-31
BOND BUYING GAINS
DURING OCTOBER
Public Turns to Fixed Inter.
est Obligations as Equity
Prices Drop.
BY CHARLES F. SPEARE.
i Dispatch to The Star.

BY CHARLES F. SPEARE.
Special Dispatch to The Star.
= NEW YORK, october 31.-As the
month of October has been the most
disastrous since March, 1925, for the
holders of equity" seurities, so it has
been the most satisfying in a veal. and
a half for owners of fixed interest obi
cations. Whether bonds and preferred
stocks have come back permanently into
the good graces of the investor cannot
be determined until the market has had
the test of selling by dealers and those
who bought as a temporary employment
of funds released by the sale OF stocks.
The primary cause for the turn IN
the bond market was the collapse OF
prices for speculative issues. This de-
veloped an attitude OF mind among IN
vestors which distributors of bonds were
quick to appraise and there began to
appear in print for the first time In
months strong recommendations for the
purchase of bonds as balance
for stocks that were declining and
whose future seemed to be in doubt.
At the same time money rates began to
ease of, although on the index of brok-
erS' loans, there was as much being used
in financing securities as previously.
The commercial demand, however, had
apparently reached its peak, for call
rates went down to a fairly stable basis
at per cent and time money dropped
IA to. pa per cent.
Upturn Was Normal.
The upturn came in a normal way,
first the highest grade corporation bonds
and the various United States Govern
ment issues; then the foreign dollar
obligations, which were cheaper than
ever with money rates down and their
prices in many cases at the lowest since
they were issued, and finally, the second
and third grade American railroad and
public utility mortgages and few Of
the distressed induStrialS joining in the
movement.
The 4 to 5 per cent legal corporation
mortgages rose from to points dur
ing October. In other words, their
yield changed from 1s to per cent.
The long-term Treasury certificates did
best among the Government obligations,
gathering quick momentum and ad-
vancing 2 to 3 points from the August
and September price level. Junior cor
poration mortgages and debentures, in
Guiding numerous Az and 434 per cent
rails and public utilities from the
vintages of 1927 and 1928, worked up
from S to 6 and points. There were
special issues that had been depressed
by local situations that took their cue
from the general market improvement
and gained 10 points or more in quick
order, dumfounding those who had
soon before dumped them out lat the
market"
The recovery in the foreign depart
ment Of the market was more moderate
than in this lower group on American.
but it went quite far in certain sections
bank bonds and the obligations of
municipalities, also in Colombian mort
gage bank issues and in certain South
and Central American provincial bonds
as also obligations Of Southeastern Eu-
ropean borrowers that had covered a
range of between IL and 20 points an
the nine months decline they had ex-
perienced.
What served to revitalize bonds had
its effect also on preferred stocks and
on guaranteed stocks, both being safe
to the investor that he would have con-
sidered most handsome two years ago.
\ Municipal bonds moved out of deal
ers' hands freely with many cities that
had been postponing bond offerings
taking more courage from the relatively
scarcity of old, issues and the better
ment In the market for corporation
bonds. The 1000, 900 offering of New
York city and Of $30,000,00O by the
Port of New York Authority, under
whose auspices the bridge between New
are cases in point.
The change in sentiment toward
bonds came only when the public be-
gan to experience losses of size to
turn their thoughts to safety of prin-
cipal and a fair yield and when money
showed evidence that it had touched
its peak for 1929. From the technical
standpoint the market was strongly in
trenched, as there had been compare
lively few bonds created, certainly not
many bonds incorporated with
stocks. Concentrated bidding for them
forced up prices easily. If the demand
for bonds goes on, it will not be long
before supply to satisfy all require
mentS will be created.
Naturally with stocks falling so fast
and so far convertible bonds have been
unpopular, losing ground as rapidly as
they had gained 1t during the Summer
and early Autumn. Temporarily the
average convertible bond is no more
S0Ao0AG t1AdAt WCAC VIC AlO4 b6dkC AoouCc
few months ago, though where 1t
represents high credit, like the Texas
Corporation per cent debentures, 1t
is readily marketable and may even
command q premium.
It should not be inferred from the
recent turn to bonds that the public
has reversed policy which has been
becoming more general, namely, to In
crease the proportion of stocks in an
investment account and to seek stability
as well as larger rate of yearly appre-
citation In values by mixing in more
and more high-grade stocks in their
portfolio. It is well that the tide has
turned for the present, as 1t had flowed
too strongly In one direction for too
long a time, with 10 per cent of the
So, 661, 000, 900 of new corporate financ-
ing In the United States In the past
nine months represented by Equity"
issues and the other 80 per cent by
long-term bonds and short-term notes,
Situation TOpheavy.
The market situation had become
topheavy with stocks, therefore, un-
healthy and the present disposition to
buy more bonds and fewer stocks will