Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-01-31
4. BY F. II. RICHARDSON.

Special Dispatch to The Star.
NEW YORK, January 31.-Until the
soldiers bonus question arose in Con-
gress, with the prospect that $780,
600 900 Government bond issue might
be attempted. and threw q scare into
the bond market, the past month had
seen 9 steady improvement In invest
ment securities. But the possibility OF
such a huge Offering was too much for
a newly convaleScent market and
United States Government as well as
other tax-exempt bonds sold down
sharply from their highs Liberty and
Treasury issues dropped from / to 2E
points below their 1891 high levels
while municipalS had corresponding de-
clines.
AS the month ended the market was
in a state of uncertainty, with one fac
ton convinced of the coming of large
Government operation and the other
committed to the belief that President
Hoover would stand in the way OF such
a disbursement.
The large interior banks and the
commercial repositories Of the large
cities, which ordinarily create the de-
mand for high-yieIding second-grade is
HA~.
for them. This Is q natural result OF
the moves made by these institutions
last November and December, when
bank failures were being reported, to
get their resources into highly liquid
position. It will be some time before the
banks feel that the economic situation
will warrant their adding anything TO
their portfolios but United States Gov
eminent bonds and the cream Of the
investment grade Of issues.
Junior Issuess.
Naturally, the failure Of! these buying
sources to function in junior issues has
greatly discouraged the Spectator who
bought junior bonds at or near their
December lows and was responsible for
driving them up from their Ininimums.
That the greater part Of such purchases
are still being held Is evidenced by the
absence of any renewed recession IN
those bonds, but II public on institu-
tional demand for them fails to- develop,
sooner or later the Speculatorsa VIII let
60. Meanwhile. the small total of trad
Ing in junior bonds is evidence That the
in-and-o uters are standing by awaiting
a move.
while this part of the market has
been neglected, seasoned bonds OF a
we'll secured type-municipal and
United States Treasury offerings, as
well as a few of the more conservative
foreign government obligations previous
to the break of the last few market Ses-
SionS, have been marked higher an q
higher. The results Of this heavy de-
mand have been the lowest time money
rates since the Summer Of 1894, the
largest amount of unloanable funds in
the history of the Stock Exchanges
money desk and an ability to absorb
new issues of a conservative type not
equaled since March and April OF last
year.
Advance Delayed.
The failure of the rest of the list to
follow these high-grade types has tenn
pered the general advance. Standard
bonds ended the month at about CTS,
compared with the 1880 high Of l01.9 and
its low of 92.9. But In January, 1928,
the same index stood at 1923, and time
rates-or an average Of so, 80 and 100
day rates-today stand just below 2 per
cent, while in January, 1928, the aver
age was 4.3A per cent. Since United
States Treasury bonds, Liberty issues,
many municipals and a few of the bet
ter corporate investment group are at
their highest prices in years, the fall
2 per cent time rate average Is directly
traceable to the heaviness Of second
grade bonds.
This situation has not existed to such
a marked degree in number OF years.
In 1925, when time rates averaged ATT
per cent, the bond index stood at So.
In 1927 time rates were AT per cent
and bonds 99.7. In 1929 time rates were
1855 per cent and bonds 99.7, and in
TxykH0
per cent, bonds were 98.4 per cent. A
month ago the bond index was about
95 and the time rate average 2.23 per
cent
The market may be expected to adj
vance above its present level in the
near future. If business does not i'm
prove the demand for prime securities
will become still heavier and prices will
run up to levels commensurate with
have dived. If, on the other hand,
business shows signs of recovery and
money starts to now through the in
dustrial arteries, where much Of the
current market surplus normally be-
longs, the banks viii seek proportion
ately higher yields from their portfolios
and a demand for junior securities will
be generated.
New Capital Market.
AS to the new capital market, there
has been shown in January tendency
to curb sharply the now of new offer
ings when 1t endangeTs listed issues. In
one week there was a total Of over
$3.50, 000, 200 brought out. This resulted
in many declines in outstanding COM
panion bonds and q general weak tone
to the market for a day or so. But,
whether concerted or not-and there
have heen reOOftS Of late of some at
tempt at, cooperation between under
writing houses in bringing out new
bonds-this oversupply was quickly
curbed. The market was permitted to