Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-07-31
MARKET FOR BONDS
IMPROVES IN July
Only High Grade Issues Are
Influenced by Easy Money
Rates.
BY CHARLES r. SPEARE.

BY CHARLES r. SPEARE.
Special Dispatch TO The Star.
NEW YORK, July 31.-A start toward
been made this month. Prices have adj
vanced moderately. Trading has been
somewhat larger than In the early part
Of the Summer. Government issues
have touched the highest prices Of the
year; likewise railroad bonds and equip
raent issues.
An analysis Of the July quotation
sheet would clearly indicate that easy
money has 50 far only influenced the
choicest grades Of interest-bearing cbli-
cations. Others have been slow to re-
spond except as they have been Of q
convertible nature.
Dealers in bonds and houses Of issue
have been pleased to witness such i'm
provement as has taken place, but they
are disappointed In the Indifferent re-
Spouse Of the general bond market to
conditions that heretofore would have
produced sessions Of twice the present
size and daily advances in proportion.
Between the first Of January and the
last week in March, when money rates
were considerably firmer than today,
the average of domestic bonds advanced
81 points. While interest rates were
steadily dropping in the June quarter
they declined TO approximately the low
January range. Nov they have re.
gained, in q nncatla notable for its nor
nal Aow Of funds int the investment
markets, less than one-third Of the
Spring decline.
while there will undoubtedly be a
sitter tone to money rates in the Au-
tumn, it nevertheless should be possible
during the remainder OF 1890 to borrow
well into 1881 at 3h per cent and on
short term from to per cent. This
ought to insure q steady bond market.
It does not, however, in the existing
state of mind Of the investor, guarantee
q market of extraordinary strength,
such as has been freely predicted for
months.
Safety Is Demanded.
The greatest degree of safety and
liQuidity, regardless of yield, is being
demanded by those who are compelled
by the low rates on call and minimum
earnings from deposits with correspond
emit banks to turn to the investment
market for higher earnings. This ex-
plains the demand which absorbed
the July issue Of Treasury bills on .
Its per cent retail basis as well IS
the fancy prices quoted for short term
municipal and corporation notes, such
as the $50, 000, 900 New York City one-
year notes, placed ut an average cost
to the city Of az to as per cent.
The higher level Of quotations estab-
lished for the legal group reflects the
overflow Of savings bank funds into
this restricted field. 1t is steadily bring
ing the standard FIRST and underlying
rail- mortgages back to from 40 TO
0E TTIaa tvnAfvy{AV9o1 invasion
who previously had purchased them at
this level, Is not interested IN them
today. And he Is not especially keen
for issues Of much higher return.
Consequently, the improvement In prices
has been most distinct In the group
representing institutional or estate buy
ing.
It Is argued that the bond market
has made a better showing than ave-
rage prices suggest, inasnuch as 1t has
held relatively steady in the face OF .
great outpouring Of new issues which
came into competition with old ones,
both In price and In quality. In the
six months to June 80 the amount OF
new bonds and notes offered for sub
scription TO the American public was
SIS, i3S, 900 900. This was about 30 per
cent greater than IN the nrst nai S o.
1879. Bonds In this period were 30
ner cent Of ali securities created. In the
same six months Of last year they were
only 81 per cent. With last years
undersupply, there should have been
a soinder foundation on which to build
up a strong bond market and TO readily
absorb this amount.
Action Of Banks.
Although member banks in the Fed
eral Reserve system have purchased
more than $3.50, 000, 900 par value OF
bonds since the market reached its
summit In March, thereby replacing
about 50 per cent of the bonds sold
in the two years previous, they have
not today the same ratio of securities
to deposits rs at other times and have
been significantly slow to move their
surplus and low-earning funds into
long-term bonds.
Many of the early issues this year
had the unfortunate sequel of declin-
Ing well below their offering price as
soon as q free market for them had
been established. The performance OF
later loans has improved, though one
of the greatest disappointments was
the action of the much-advertised and
intensely promoted German RI ARA
tons 54 per cent issue, which orop-
before payment day had arrived. This
justified the opinion of those who had
felt the figure Of 90 too high for the
bond, In view of other German In
vestments at q much better return
American bankers should be eSpe-
cially cautious from now on in the
matter Of foreign loans offered to their
clients and take great pains to con-
form the price to that of other avail
able issues of the same quality. Heavy
depreciation has occurred in the port
foiios of banks from their readiness
the last few years to subscribe to any
foreign issue that was put up to them
by responsible houses. Recently there
has been discussion of another Aus
tralian loan in this country, though
already the shrinkage on the Aus
tralian government and state loans
has been nearly IL per cent, or,
roughly, $25,000,0o0.
Other Foreign Issues.
This is also true of large groups of
German municipal and mortgage bank
bonds and VIGOROUSLY so Of practically
all of the South and Central American
governments, provinces and mortgage
banks. Very little response has been
made by any OF these issues est, 70 ,,, the
Against the profits on American for
eiSn trade stimulated by American
capital In the form Of dollar loans
should be debited the very considera-
BE depreciation that has occurred
from the cost price to institutions and
private investors who have bought
Australian, Austrian, Argentine, Bo-
Hyiarl, Brazilian, Bulgarian, Chilean,
Colombian, German, Greek, Italian, Pc
rIyian, Polish, Rumanian and Serbian
bonds in the past three years. Not
little of this loss could have been
avoided If the houses Of issue had
sIven less consideration to their pres
S..aI ..aara IA tia raaarket cnndi.