Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-12-28

abruptly to the lowest point touched
since 1922. These moves, the first Of
which was traceable to the influence Of
money rates, were accomplished in a
volume of trading that only averaged
about SPAS, 100000 a month on the New
York Stock Exchange. This compared
with a monthly average of $251 100000
in 1929, itself a poor year for bonds be-
cause of the enormous popularity OF
stocks during the first ten months. Here
was proof of the indifference of inveS-
tors to the great body of bonds.
Easy Money Conditions.
Money rates remained at bottom levels
during most of the year, following the
action of the New York Federal Re-
serve Bank in dropping its rediscount
rate from AZ per cent to pa per cent.
Time money dropped steadily until the
90-day quotation reached 2 to ga per
cent, where it stayed until the last days
Of the year. There was slight Stifen-
ing of rates just before Christmas, at
tributable to year-end requirements.
Another cogent factor in the back
ground of the market was the drop in
the prices of basic commodities which,
measured by the Department Of Com
merce index, was from 96.3 to under
81. But there was no traceable response
to the theory that when commodities
~ uOWH III PRICE, JULIUS dufhuCc AZ was
natural to suppose that as the purchaS-
ing value of the dollar increased, there
would be higher value placed on Sc
curitieS on which the income was as
sured or reasonably well secured. But
this did not prove to be true.
Banks and insurance companies which
are ordinarily the largest buyers of
bonds, were under the necessity of sup
plying funds to depositors and policy
HrI6 ov-- ruyk1 NySCI nod 81 Ae
consequence these institutions were not
able to buy to their full power in the
earlier months of the year, and near
the year-end they were forced to liq-
uidate large amounts of bonds in order
to conserve the liquidity of their re-
sources. The volume of investments re-
ported by Federal Reserve member
banks in February stood at $5,541 ,000,-
600. The figure was $685., 000,0 900 in
November but in the last month of the
year banks were forced to dispose Of
bonds amounting to well over $780, 000,-
600.
Less Financing by Stocks.
The public's indifference to common
stocks was well proved by new financing
figures. Whereas in 1929 roaring year
for stockS-there were $6,931 .408, 100 of
new stock issues sold, In 1890 there were
only $1,500,000 Even when COM
pared with the more normal year of
cause in that year there were sold
$3,626, 165, 481 of stocks, while in 1927
the figure was 81, 773 ,287, 6O4.
During 1880 stocks comprised about
Is per cent of the total of new financ-
ing while the remainder to the amount
of about $500 100000, was in bonds.
In 1929 bonds accounted for only about
IS per cent of the total financing. In
1928 bond financing was about SO per
cent of the total and in 1927 it was
over 80 per cent of the total, so that
when 1880 is compared with the years
1927 and 1928, where there was no
feveriSh demand for common stocks
and money rates were at figures COM
parable with the current quotations, it
has the appearance Of o year much
nearer normal.
New bond issues during the year were
largely of high grade type and there
was sharp curtailment of the volume
of issues carrying such features as con-
vertibility into stocks or options to pur-
chase stock. Many offerings, of less
well secured nature, were put at prices
obviously much too high, judging from
their subsequent collapSeS, and at times
the investment market suffered from
indigestion, especially In the early
mOntuS OF the year.
Municipals Eagerly Sought.
Owing to their anxiety to keep funds
in As close an approximation Of cash
as possible, the large investing insti-
buttons such as the commercial banks,
the savings banks and the insurance
companies bought only the highest
grade of securities. There was a good
demand for long term prime issues. but
the feature was the unprecedented
premium placed on short term high
grade issues Municipals included in
this category and maturing serially
over a period of years were so sharply
bid for that at ths peak the one-year
matur1ties sold on 3 per cent yield
basis. The same applied to railroad
equipment certificates.
The United States Government was
able to borrow in mid-December at the
record rate Of IA per cent per annum
for six-month notes and 1A per cent
per annum for 12-month notes. When
compared with the 5 per cent rate that
the Treasury was compelled to pay in
1929, these figures become q signih-
cant barometer of the position of the
high grade short term market. These
low borrowing rates were probably
about IS per cent due to the low rate
prevailing for money and 25 per cent
due to the abnormal demand for read |
lily cashable paper.
mostly issued on a serial maturity basis, |
short term paper put out during the |
year amounted to about $675,000, 600 |
compared with $262, $50, $50 in 1929 and |
$275, 118,600 in 1928. Municipals |
amounted to about the same as the 1929 |
total Of $1,379, 147,42S.
WjdeHnread Between Groups.
Money rates had their effect during |
the first eight months. Corporations |
longer able to gain substantial returns |
and certain of the banks, being no |
on their funds by placing them in the |
call money market, where the rate |
most of the year was 2 per cent and
went as low as w per cent, bought
moderate amounts of high grade is
sues. But there was little demand at
issues, and the spread between the |
groups was q matter Of comment during |
the entire IL months.
During the period Of advancing |
prices, the index Of the market as pre- |
pared by Standard Statistics on 80 rep |
resentative bonds, taking the 1925 aver
age as 100, advanced from 90.A to Q
high point Of 101.0.
Meanwhile the worldwide business |
depression, as expressed In the decline
of commodities, slowing up Of interna-
tional commerce and the universal low
ering of money rates, had reached the
point where actual unrest in South |
America, political upheavals in Ger
many and other European countries and |
acute economic distress in Australia
we're the sequels. The American in
vestor, never temperamentally suited TO
hold foreign dollar obligations, saw
whole groups of these bonds drop OF
80 to so points.
The market became almost demor- :