Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-05-17
EASY CREDIT FAILS
TO IMPROVE BONDS
Market Has Shown Declining
Tendency Despite Lower
{ ing of Rates.
By CHARLES F. sPEARE.

Special Dispatch to The Star,
NEW YORK, May 1.-THE great
Wall Street mystery of the day is the
action of the investment market in re-
fusing to respond to set of conditions
more favorable for its advance than any
that have been provided for it in the
past two years.
Today the average Of selected list
of domestic bonds was below the aver
age of May /. when the rediscount rate
of the Federal Reserve Bank OF New
York was reduced to 3 per cent and a
general slashing of money rates occur
red throughout Europe. The average
Of foreign bonds was also slightly under
the level of two weeks ago. In between
these two dates there has been small
and brief rally. followed by slow but
persistent decline.
Compared with the high average for
the year reached on March 20, domestic
bonds are OF nearly points. Foreign
dollar is ues reached their top for the
year all ,Ut y week later than domestic
issues They are now nearly point
below the bet figure of last March.
Temporary Surplus.
Except for the temporary surplus OF
funds IN March. which for short
period forced open money rates down
to III per cent, the entire money mar
ket situation at present Is more favor
able to the investment market than 1t
was six years ago. Call loans are re-
newing at per cent from day to day.
compared with 81 per cent earlier.
Time money Is quotsd at 3H4 to S14
per cent for 60 to, 80 days as against
3ls to 4 per cent in the last week OF
March. Bankers acceptances are 2as
per cent bid as against 3 per cent. The
recent trend of brokers loans has been
distinctly downward.
With these factors all making for
strong investment market, dealers IN
bonds. who expected to see their busi-
ness broaden out rapidly after redis-
count rates here and in Europe were
reduced, are sitting idly by and waiting
for something to happen. They have
been moderately successful in dis
tributing some of the new issues. In
others they have had the familiar ex-
perience of obtaining large allotments
and being unable to sell their proper
ton. A few bonds have gone to a
premium; others are being held at their
issue price by syndicate bids. No
difficulty seems to be experienced in
maturity, either of corporation or
municipal bonds.
On the other hand, there is decided
resistance to the sale of long maturi-
ties. This is in contrast with the
normal disposition of the buyer OF
bonds to seek the long rather than the
short maturitieS when money is ex-
tremely easy and promises to remain so
Cor an indefinite period.
Supply of Bonds.
1t is argued that there are too many
bonds in the market. In comparison,
however, with other periods Of cheap
money, notably the early part OF 1928,
the supply is not excessive. Further
more, while there have been some in
stances of price imitation beyond the
point warranted by quotations on ex-
isting issues, syndicate managers have
used better Judgment this Spring in fix
ing quotations and yields on new Of
ferings than they did two years ago.
There has not been the extreme conpe-
tition that resulted then in a great mass
OF Ar per cent domestic and foreign
bonds which the public would not buy
ut the asked figures.
Technically, the market is in better
state today than in previous times of low
money. It has a stronger warrant for
rising, in the lower average of money
rates and in the possibility of these rates
being long maintained, than it had in
the Spring of 1928, when Az per cent
bonds were being issued at about the
same prices now being asked for per
cent obligations.
So far as there is any satisfactory
answer to the failure of the bond mar
ket to advance and to adjust itself to
the several steps taken by he Federal
Reserve in its behalf, it lies in the fact
that the institutions have not yet taken
o decided position on bonds, following
their experience with shrinking bond
accounts last year, and that the general
public Is still stock-minded In spite OF
its losses six months ago.
Look for Appreciation.
Institutions and individuals are at
tracted to bonds in rising market Just
as they are attracted to stocks when
these are being advanced from day to
day. In both instances the buyer wants
more than the return from interest or
from dividends. He is looking .or cap
atal appreciation.
II the semi-annual interest ,eriod
which the bond market usually starts
70 discount early in June does not de-
velop better conditions, investment
bankers will be much disappointed and
will begin to turn their attention again
70 the distribution of Equity issues.
copyright. 1901