Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-08-18
BONDS DISCOUNTED
BY BUYING PUBLIC.
Market Continues in Dol.
drums as Credit Situation
Remains Doubtful.
Special Dispatch to The star.

0peclal DlSphtcn 10 Inc pytr.
NEW YORK, August II. - while
atocks recovered quickly this week from
the FIRST effects of the higher rediscount
rate and made new record, so far aS
the industrial and public utility aver
ages were concerned, the notice to the
country that 1t would have to pay In
creased rates for borrowing money was
another unfavorable influence on bonds
Nothing seems to happen to improve
their position.
On comparatively small transactions
high-grade issues declined until the do
nestle bond average reached the lowest
levels since December, 1928. No change
occurred in the standard 4 per cent rails
or in the w per cent public utilities,
which have legal status in many
States. The losses were chiefly in issues
that sell infreQuently and whose market
Is 80 thin" that the liquidation Of small
amounts causes exceptional declines.
Weak Situations.
There were also weak situations in
the second-grad mortgage issues, both
of the rails and the industrials. In this
group . considerable number sold at the
lowest prices since the decline set in.
Scattered through the markets for
bonds traded in on the New York curb
market and over the counter" were
many others in which the lack Of de.
mand and small offerings caused breaks
Of 2 to ; points. There is absolutely no
relation at present between prices OF
bonds and the equities invested in
bonds The public utility stocks may
double and treble in price, but public
utility bonds at the same time may be
falling at q rate that would suggest that
they were obligations of a corporation
in financial dif1culties. The same con-
dition applies 10 the debentures Of the
investment trusts, which are selling at
what appear to be absurd quotations CO.
ancident with earnings on the common
shares Of these companies that seem
fantastic.
New financing this week has either
been in the form of municipal bonds or
common stocks. The market for the
former is Influenced by money condi-
tionS which compel city and State Dor
rowerS to pay for improvements at an
extremely high rate, especially II they
resort to short-term notes. On the
other hand, corporations that can sell
their stocks are able to borrow on the
lowest terms in their history, for the
public wants stocks and does not want
bonds.
The major portion Of this weeks new
offerings was for the account OF in
Vestment trusts. Four of these alone
offered an aggregate of $3.50 900, 900.
Next Test in September.
The next test OF the investment mar
ket will come in the early part OF Sep
TENDER, when the Government must re-
fund a large block of notes maturing
September IS, The last issue was put
out at 51a per cent. when 90 redis-
count rate was 5 per cent. T''iS was
looked upon as one Of the most :'elng
evidences Of the strain on the inve1a:
ment market due to the absorption -
funds by speculative securities. Secre-
tary Mellon will be compelled to make
another concession to this situation and
to adjust his financing to Q per cent
rediscount rate. Under the circum-
stances q 81 or S13 per cent coupon on
the new notes does not seem improbable
at the present writing.