Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-06-08
Preparations Bond
Financing Retards
Investment Market
Plans for New Loan Held
Responsible in Lack
of Trading Interest.
pecial Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, June THE past week
in the investment market has been
merely another section of that calm
before-the-storm" phase which pre-
cedes the coming issue of $500 600, 900
German PREPARATION bonds, the first of
a number of similar issues through
which Germany's war debt is to be
liquidated.
Meanwhile, a considerable crop of
propaganda. good and adverse, has been
disseminated throughout the world re-
garding the bonds. but one opinion
seems to be general-that they will be
distributed quickly and securely if the
price is right. This has been set I'M
officially at 80 to 81 for the New York
market and at a slightly higher level
for the French market In order to
prevent transfers from New York to
Paris, the French slice will be made
tax free to French holders only.
Loan Charges.
Since the bankers in charge of the
loan must raise a full 100000 900, and
there will be bankers charges and so
forth to pay out of the proceeds, as well
as the 8 points or more of discount, the
loan will have to carry face~Value of
considerably more than 100000 900
1t will probably be In the neighborhood
of $685., 000, 900.
1t is interesting at this time to COM
pare this issue with the 5000. 0OO. 900
German separations issue of 1924, and
to outline world money conditions then
and now. The 1924 loan was for the
purpose of financing the preliminary
separations under the Dawes plan, and
1t was marketed, as the present one
will be, by a worldwide syndicate
comprising some 400 banks and 800
bond houses. The centers distributing
slices included Great Britain, France
Belgium, Italy, Sweden, Switzerland,
Holland and Germany. The same set
up Is proposed for the new loan. The
price of the 1924 loan at issue was 80
and while the specific security, the
governmental revenues of Germany and
In particular the liquor revenues, was
slightly different, the ultimate security,
which was the credit of the German
nation, was the same.
But there the similarity ends. The
1924 loan, in a money market of high
rates and scanty funds, carried a per
cent coupon. The present one, in a
market where low rates prevail, carries
So per cent coupon. A glance at
banks of issue then and now will re-
veal the wide difference in money con-
,ditions. ....
Reserve Bank Rates.
The only rate which stands the same
today as in 1924 Is that of the New
York Federal Reserve Bank, at per
cent. other banks of the Federal Re-
serve system had rates at 312 to 4 per
cent. The Bank of England rate,
which is today at per cent, then stood
at per cent. The Banque de France
today discounts at 212 per cent against
per cent in 1924. Germany'S rate,
now Az per cent, was then 10. Nor
ways rate, today Az, stood at z; Dem
and So; Hollands, 3 and S.; Belgium'S,
3 and 5Ia, and Switzerland's, 3 and 4
per cent.
The New York slice of the 1924 rep
arations loan was four or five times
oversubscribeds in Is minutes after the
books were opened, and the New York
Times remarked, mot since the United
states Government sold its big Liberty
and Victory loans in 1917 and 1918 Tor
the purpose of raising money to defeat
Germany has there been such wide
spread public response to bond issue. y
No Difficulty Seen.
No one expects the new loan to go at
so rapid a rate, or with the enthusiasm
eneendered by the 1924 loan. Neverthe-
less. bond dealers forSee no difficulty In
disposing of the issue.
The 1924 loan sold on the New York
Stock Exchange on the day Of its issue
as high as SIS and during the years
has appreciated until it stands today at
over l08. People who originally sub
scribed to it at 90 and who sell it today
at 1903 receive an annual return of close
to 1917 per cent. when their discount at
purchase and premium today are flg-
ured in.
on the othersside of the picture, bond
analyzers are inclined to doubt that the
new loan will have the market appre-
citation of the first loan. at least not in
such a short time They point out that
from now until the separations debt Is
completely liquidated and every bond
redeemed. there will be frequent similar
issues and these will have tendency
to hold a check on the new loan.
Despite the dampening effect of tho
coming loan on the new capital market
the last week saw a total of $117,875, 900
new bond fiotations, against 46,767 900
in the previous week and $l27, 1858 900
two weeks ago. Listed bonds did little
of note. There was some buying of
Government bonds in anticipation of
the June financing and they rallied
fractionally. Foreign credits were firm
with the exception of minor fluctuations
in South Americans consequent OF re-
ports of political troubles In Bolivia
and Colombia.
fConvright 1907