Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-10-21
j. S. BONDS return
TO BUYING RANGE
Investors Beginning to Show
Interest in Various Gov
eminent Issues.
BY CHARLES F. SPEARE.


Special Dispatch to The Star.
NEW YORK, October 81. = The
safest securities in the world today are
United States Government bonds.
When banks wish to place themselves
in the strongest possible position to
meet emergency requirements these are
the securities they buy The latest
statement of the Federal Reserve Board
indicates that the member banks in the
Federal Reserve System are today hold
ing S4,200,000 900 of Government obli-
cations. In the past year they have
increased their ownership in such issues
by 81 ,204 900, 900.
Owing to various causes Government
bonds and Treasury certificates have
OF late undergone the most radical de-
probation since the postwar selling
ended. In group of IL active issues
the decline from the high point of this
year has amounted to per cent. In
individual bonds it has ranged from
lO12 per cent to 1874 per cent. These
losses have been directly due to the
increase in the Federal Reserve redis-
count rate in New York from IL to
2i2 per cent with readjustments to
this level by other banks in the Fed
eral Reserve districts of the country.
Emergency Selling.
Liquidation has also been brought
about by emergency selling where banks
became insolvent or where runs in To-
calities compelled the building I'D of
cash resources. There has also been
among the later Government issues.
which carried low coupon rates. an adj
justment in their yield to that of the
United States Liberty Fourth 414 per
cent bonds and to the Treasury per
cent certificates.
Some of the most striking declines
are those in the Treasury Al per cent
issue, which sold as high as l141.
early in the year and is now around
102; the Treasury as. which have drop
ped from about 109$s to approximately
100: in the Treasury 3a.s, which are
of from 10734 to go: in the Treasury
1855 which have had a uniform de-
cline of about points; in the June
issue of Treasury 3lss. which three
months ago sold at 1927 and this
week at 90i3. and in the September
issue of Treasury IS, which have gone
to a discount of over 10 per cent.
The effect of this has been to change
the entire income return on these pre-
nlier securities. Formerly none but an
institution that was compelled to carry
certain type of bond in its portfolio
could afford to hold issues on which
the yield ranged from less than per
cent down to about ? per cent with
short-term Treasury bills at one time
selling to return less than one-half of
l per cent. Today the average return
on 10 Of the most active Government
issues is better than 334 per cent and
on the fourth Liberty 4 IS and Treas
TRY AIS over per cent.
Bonds in Buying Range
This change in the yield basis on
Government issues once more brings
them into buying range which inter-
ests the individual investor. What he
wants primarily is safety. This he has
in United States Government obliga-
tons. Secondarily. he feels compelled
to have his capital earn in these times
as near per cent as possible. To COM
bine safety with satisfactory return
he has been increasing his deposits
steadily in the savings banks, as the
rate in commercial banks dropped of
until it reached only a nominal figure
for demand deposits.
The average rate on the deposits OF
the mutual savings banks and on the
thrift accounts of commercial banks fer
the past six months has been 81 per
cent. with exceptions at 4 per cent and
in few instances where Z per cent is
still being paid.
Will IIAC bGI1lllc III lIlb pIItt Va AON-
eminent bonds and the advance in their
yield, they are now for the first time in
nearly two years on competitive basis
with interest rates for savings deposits.
This fact is being taken into account
by investors. There is beginning to be
on expanding interest in and demand
for those Government issues which
have in the past week dropped to a dis
count of 9 to 10 points.
Since the American people sold out
their Liberty bonds after the war and
had them called in subsequently. there
has not been much Of a public invest
ment in United States Government OBJ
legations. Efforts were made at the
time of the offering Of the Treasury
3iss and Treasury 3 per cent issues to
encourage the small investor, but the
return then was too small to bring
much response although in the case of
the IS there were numerous $50 and
500 subscriptions.
Situation Changed.
The situation now is quite different,
with yields of better than 80, per cent,
or in excess Of the average savings bank
rate, and a discount that the long
term holder of Governments would ex-
pect to realize on over period Of years.
Copyright, 1917