Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-01-07
DROP IN INTEREST /.
| RATES IS FORECAST
Bankers See Further Recess
sion in Leaning Charge
for Funds.
BY CHARLES F. SPEARE.

Special Dispatch to The Star.
NEW YORK, January with the
return flow this week to the banks of
currency used over the holidays and the
deposit of interest and dividend checks,
bankers see ahead the beginning of A
season of lowest average interest rates
since early in 1928.
The extent of the period Of low
money. however. is still debatable. At
abundance of call money, which is re-
lated to the decline in Stock Exchange
transactions to the smallest daily
volumes in months, as we'll as by the
much reduced average level of prices OF
securities. It is also affected by con-
tracing commercial demands. Up to
date, the fact that nearly $100,000,000
gold has been exported, or approxi-
mately one-third of the total amount
which it is believed may go out on this
movement, has made little impression
on the money market as it is so much
overbalanced by other conditions.
Purchases Postponed.
The difficulty in determining the ex-
tent of the low money era explains the
postDonement of long-term investment
purchases, particularly fixed interest
bearing securities. Individuals and in
situations that have funds available
, have not yet come to a definite conclu-
sion as to whether the time is propitious
for buying securities that fiuctuate with
interest rates. This state of mind is
also apparent among borrowers. Appli-
cations recently made to the Interstate
Commerce Commission for new finance
ing have included more requests to issue
Short-term securities than were to be
expected on the eve of readjustment IN
interest rates to severe deflation in
the prices of securities.
Judgment concerning money rates
and, therefore, prices of bonds, was so
inaccurate in the early part of 1928
that there is hesitancy today in making
long-term commitments based on the
money market outlook, although condi-
tons favor low rates much more than
they did two years ago. This is not
only true of domestic but foreign mar
kets. Equally important from the
standpoint of the underwater of bonds
and the borrowing corporations is the
contrast between the last period of easy
rates and large emissions of bonds and
the technical surroundings of the in
vestment market. Those of the earlier
periods were decidedly weak from a
great excess OF new securities. Those
today are strong through an absence
of supplies.
Numerically and in the total dollar
amount offered municipal issues lately
have been taking the lead over those
for corporation account. While the
corporations were able to sell their
| stocks to advantage last year and piled
up an enormous sum of capital for
which they have no use in the way of
putting it to work in new buildings.
new machinery etc, the municipalities
mad to suspend improvements from an
inability to borrow, except at very high
rates of interest. The latter are now
going ahead with deferred work and
paying for it out of the proceeds of
loans for which the public is anxious
to subscribe and which they can sell
on a very satisfactory basis.
Short-Term Credit.
While there is almost no long-terrn
borrowing for foreign account, banks
that specialize in extending short-terrl
! creolts to European countries have been
| DONG a lively business in the past six
weeks and finding abroad a profitabIe
outlet for their surplus funds. Eventu-
any 1t IS expected that these credits
VIII be refunded into long-term loans
Out not until the average of the for.
elgn bond list is materially higher than
at present and the confidence of the
american public, now badly shattered
oy ltS experience in South American
ana German issues particularly, has
oeen restored to approximately the de-
gree OF the years 1925 and 1927. q