Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-02-28
DEMAND FOR Bonds
CONTINUES QUIET
Many New Issues, Chiefly
Utilities, Have Been Sold
During Month.
BY CHARLES r. sPEARE.

OF the past month has been in its abb,
sorption of new issues, Of which those
offered by the public utility companies
have had the greatest success and have
established the largest premiums. The
trend of old issues has not changed a
great deal with the influence OF easier
discount rates and more abundant sup
plies OF capital overbalanced by the
pricing Of new issues below the market
for those of the same type or of the
$; me corporation that we're outstand-
ing.
It has not been difficult to sell high
grade bonds. Nearly all of the new is
sues of this character have been quickly
absorbed and have sold at and held
premium prices. The main buyers have
been the institutions, such as insurance
companies and savings banks, once
more in funds after the November
drain, with certain amount of trustee
demand. The movement of these Sc
curities has been stimulated by the poll
icy Of Offering them well below the
ruling market at which companion
bonds were quoted, which has resulted
In the reappraisal of old issues of as
much as from ! to points and ex-
plains why the bond average has ad-
vanced so little when money rates have
been so low.
Second Grade Issues.
Second and third grade bonds of re-
cent emission have not gone so well,
They do not attract the institutions.
The public and the average bank have
not been disposed so far to buy them,
The individual investor is still stock
minded and prefers to buy more stocks
IN the effort to make up his recent
losses than to turn his capital into what
ne considers to be slow-moving securi-
hn
| are not yet out of the congestion which
resulted from overloaning on real es-
tate and on securities and their experi-
ence with depreciating bonds last year
mas made them cautious in the matter
OF engaging in new commitments of the
same character. Like the public, they
want more kick" and demand convert
tbles. The fact that yields on common
stocks have again dropped below the
average return on bonds may make
some difference to the investor II It
continues for any length of time, and
as the banks work out of their collat-
eral loans and have no outlet for their
surplus funds in the call money market
they may eventually become bond buy
ers. This is a prospect, however, of q
future rather than an immediate char
acter.
The attitude Of the investing public
at the end Of the three and one-half
months period following the most Sc
we're decline In common stocks ever ex-
perlenced Is certainly @ disbursement
to the promoter of bond financing. Il
was felt that only as common stocks
declined and money rates became easier
would It be possible to induce another
! broad movement of investors into fixed
interest obligations. We have had the
panic and we now have the easiest
money rates since 1928, but there Is
bonds.
It may require a new course Of edu-
cation TO re-eStablish the position Of
the bond In the public mind. Assured
~ IL mas only secondary place there
today. To certain extent bond dis
tributors and underwriters are respon-
sible for this, as they made q practice
OF bringing out new issues at level
that could not be maintained and which
were known TO be too high in COMPARE
son with old issues. At the same time
the volume OF new financing was in ex-
cess OF the capacity Of the market to
absorb 1t. All of this resulted in severe
shrinkages and losses both to individ-
ualS and TO institutions who made pur.
chaSes OF either domestic or foreign Sc
curities between 1927 and the Spring Of
1923.
Convertible Bond Demand.
The experience Of those who are ne
gotiating now for new bond issues is
That unless they are of an institutional
character 1t is necessary that they be
OF q semi-speculative type, with con-
version privileges or stock variants at
tached. The buyer of bond not only
demands the opportunity to share in the
earnings of a corporation issuing such
an obligation, but q reasonable market
for 1t when he comes to sell it. There
was too much of the low-grade public
utility and industrial type Of mortgage
last year when the financial troubles
were at their acute stage, with no mar
ketS for many of these issues. Where
bid was available it was so much
below the price at which the bond had
been sold that 1t would have been ruin
Gus for the bond holder to accept it.
What the market needs in order to re-
habilitate itself is long season of high
grade issues to leaven the mass of
rather soggy mortgage and debenture
issues now outstanding
The municipal bond market has been
anected by the Chicago situation, which
compelled the repricing of some of the
December and January loans In order
to move them out. Government issues
have been irregular, with early response
to the lower rediscount rates, then q
reaction and later a recovery, and with
,nctng will be at figure In harmony
with the open market rates for money
at that time. The Government Is now
In the fortunate position of being able
to refund some of the high-interest-
bearing Treasury notes which ii was
compelled to issue In 1898 and In 1929
1925 and 1927.
High-grade foreign dollar bonds have
acted well and are gradually being pur-
chased Tor European account. There
has been a substantial recovery also in
the second and third credit issues of
South and Central America and of
Europe. They are still long way from
the prices paid for them by the Ameri-
another month the Bank for Interna-
tional Settlements should have been
established and a definite program in
connection with the reparations los
set up. 1t Is assured that as measure
tcr promoting the success of this loan
In the United States there will be a
certain amount of window dressing" of
German issues and possibly In G&nss-
continental loans whose markets &C the
time might have an influence on sub
Scriptions TO this loan.
New Financing.
From the standpoint Of new financing
bond issues have had the call on the
market and have run far In advance Of
offerings of common or preferred stocks.
This is the reverse of the condition pre-
vailing year ago. The discrepancy is
mainly due to the absence Of common
stocks OF finance companies, which in
the period between July and October
mounted much above any other form
OF new security Offering. There 6 no
doubt that If the rise in common stocks
continues there will again be q promo
ton Of junior security financing TO at
tract the public, while the institutions
continue to absorb the mortgage issues
that carry high ratings.
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