Evening star., 1930-06-28

have been sluggish
Sand have had small daily fluctuations.
Month after month they have moved
less from a fixed average than in any
similar time in the past decade.
Bonds traditionally rise when money
is cheap commodities are falling. trade
is poor and when there is a bear market
in stocks. Money today, both for short
| and long term, is in greater supply and
at lower rates than in years. Com
modities have been falling quite steadily
since 1923. From the high point of
| 1929 to the middle Of June a slump
approximating IL per cent has occurred.
The top of the years bond market was
reached in March, about two weeks
earlier than the crest of the market for
stocks. Both were Influenced at that
| time by glut of funds which forced
| open market rates for a few days down
to n per cent. However, since then there
has been general downward revision
| in Federal Reserve rediscount rates as
well as in rates of the central banks Of
Europe. AS liquidation in stock has
meanwhile brought their average below
that of April and May, and with many
individual issues selling under the prices
| of last November, these two influences
should normally have been to the ad-
vantage of fixed interest rate securities.
EANbAoAyI 4tOnCNC4S bOudy are VERY
| much lower than they were in March
when both money and stock market
conditions were less favorable to them.
New Issues Compete.
Technically, bonds are not in so
months ago. This Is the effect of a
heavy flow of new issues into the mar
ket, competing in price and in volume
with those already listed and subject
ing the older issues to more or less
unfavorable comparisons. mainly in the
| matter of income return. It might be
possible to dismiss the question of why
bonds have failed to respond to cheap
| money with the single answer that
| they have been overwhelmed by the
new trend in financing since last year.
The latest figures available for va
rious kinds of domestic and foreign
borrowings in 1880 cover the five
months ending May 81. During that
+ period the aggregate of such borrow
ings was approximately 81, ,412, 900, 900.
1t was the smallest since 1926. The
significant feature of it, however, was
the expansion in the three items of
| domestic long and short term bonds
| and notes, municipal issues and for
eign obligations. Domestic bonds and
notes were approximately $2073. 900 900,
| Preferred stocks were a little less than
half the volume of the first five months
Of 1929, and in spite of their popularity
| and the manner in which they have
sustained their prices they were the
smallest in a five-year period. The
greatest contrast appears in the par
amount of domestic common stock,
which totaled about SS46, ,000, 900, as
| against $2,245 ,00o,0 in the January
May period Of 1929.
Decrease In Trust Stocks.
If the issues of common stocks are
| further analyzed, 1t will be found that
high percentage of the total repre-
sents the proceeds of sales by public
the offerings by the American Tele-
! phone & Telegraph Co. of $235, ,000, 900
and other much smaller amounts di-
rectly taken by shareholders make up
! large figure. Investment trusts and
trading corporations, which had issued
| $771 900, 900 of stocks, mostly common
| stock or preferred stock convertible
| into common, to May 81 last year, had
confined their stock sales in the five
months of this year to $69, 900 900. In
| dicating the general situation in the
industrial world and as we'll as the
great preference last year for stocks
! over bonds was the shrinkage of IS
per cent in the shares of industrial
and manufacturing companies, while
similar conditions in real estate led to
a decrease of even more than this in
the securities of land and construction
companies.
1t is evident from this comparison of
the amount of stocks issued this year
| and that put out during the first half
of 1929 that the burden of providing
| capital for corporation purposes was
| thrown on the bond market. The un-
digested amounts are those of second
and third rate credits which were forced
into the market and had been expected
TO be taken up when the momentum
was strong in the Spring 1t was esti-
mated in June that approximately one
third of the new issues offered since
January / were still in dealers hands
and that, in some instances, as much
as 40 to so per cent of the offering was
| then unsoid.
Below Of1icial Quotations.
This raises the question whether the
presence of so many bonds on the mar
ket and available at prices really below
those quoted for them on official sheets,
or the diSinclination of the public to
invest its money where 1t will have rel
atively small chance of appreciation, is
the primary cause of the bond markets
troubles Nearly every investment
house has had the common experience
of trying to sell new issues to old
clients and finding them uninterested in
the proposition. They have been able
to distribute large blocks of bonds to
the insurance companies whose funds
are steadily rising and to savings banks
as the deposits of the latter have in
creased and recovered from the effects
of last Autunn's Withdrawals. There is
always a substantial buying power
among the estates and trustees who
cannot invest in stocks. National and
State banks and trust companies have
sporadically been subscribers for goodly
amounts of new issues which promised
them early appreciation. In a limited
number of cases. however, the individ-
ual buyer Of bonds has been Indifferent
| to the action of his old favorites among
the rails, public utilities and industrials.
There is every indication that money
rates will be low during the Summer.
If the theory is correct that business
will begin to improve in the Autumn
money market reflection of this would
appear then following the adjustment
| in Federal Reserve policies to broader
| commercial demands. Before this time,
however, rates are likely to be lower
even than they are today. This may
only stimulate an increase for short
term securities which have been pre-
| ferred over long-dated issues to such an
extent that there is now a great scarcity
| of them.
(CopyriEht. is3o)