Evening star., 1931-12-27
VALUE OF BOND MARKET
DEPLETED $4,000, 100000
Favorite Maxims of Financial Forecasters Upset by
One of most Disastrous Years in History of
Fixed Income Securities.


which the market appraised the Liberty
loans callable next year indicated the
generally held opinion that the time
for their profitable refunding was past.
Municipals Marked Down.
Munieipals dipped with Governments
to certain extent, but the real fac
tor behind their decline was a more
careful scrutiny by investors of the
$4,000, 100000 list Of municipals out
standing. Banks, insurance companies
and individuals took new and cautious
attitude. The credit rating of even the
largest cities and most populous coun-
ties was no longer taken for granted.
Technical defaults in Chicago, and ac-
tual refaults in many Florida mu-
inequalities and in other scattered COM
munitieS throughout the country left
the market in such a state that even
Detroit, heart of the motor industry,
had to pay heavily for short-term ac-
commodation.
Returning to foreign bonds, during
1881 there was total depreciation ir
foreign dollar issues listed on the New
York Stock Exchange Of $6,435, ,000, 900
This was on a total par value of $l9,-
229, 100000. These figures, however,
include the unwieldy 100000
per cent war loan of Great Britain anc
Ireland, which is not active. 1t de.
preciated from above par to around Sc
during the year, end thus account:
for large part of the total loss ir
foreign bonds
German government bonds, owing tx
thu seriousness of the Reich's financia
position and the improbability that
France will alter her stand on repara-
tlonS, dropped to levels very similar tt
those of the South American group
from 25 to As cents on the dollar Ever
the Dawes Preparations rs, which are 6
prior lien on almost the entire Ger.
man internal revenue, were quoted vel
below SO. A large percentage of South
American bonds were in default and
with the possible exception of Argentine
issues, are now viewed as not likely ever
to pay face values.
Japanese issues dipped steeply at the
start of the Manchurian crisis anc
f1uctuated unevenly afterward, but
their losses were hardly comparable tc
the declines in the European list.
British bonds after dropping rapidly
from their high position. Wavered un-
certainly with the sometimes violent
movement of sterling Near the year
end Premier Ramsay Macdonald an.
nounced that it would be some time be-
fore his government could even consider
the rehabilitation Of sterling, so that
the outlook for British and many other
foreign bonds remained uncertain.
Canadian exchange was another
cogent factor in the bond market. II
equaled its low of the 1920-l921 clisis
When the Montreal dollar sold in New
YORK at l6 per cent discount. Naturally
this break, along with that of sterling
precipitated much selling of dollar
securities which had been held here ir
order to realize on the cash premiums
Hope in the Air.
Hope was in the air as the veal
ended-hope that President Hoover anc
Congress- by implementing his sug.
gestlons, could bring aid to the rea
estate market assist the railroad,
across their perilous low traffic bridge
and clarity the foreign situation boti
IN Europe and in the Far East Some.
thlng concrete in the way of aid fol-
the savings banks was effected by the
adoption by legislative committee OF
an amendment to the New York State
banking law to permit railroad bonds
which were legal for savings banks and
trust. funds on January l, 1881, tt
remain on the legal list.
In 1881 new bond issues dropped 4t
per cent below their 1880 total. New
offerings, including common and pre-.
ferred stocks, dropped 48 per cent
virtually all Of those issues that were
offered were of the highest character
However, with the exception of the
boom years Of 1927, 1928, 1929 anc
the depression year of 1890, the tota
OF new security offerings for 1881 wa.
much greater than in any previou.
year OF American history In this fact
the underwriting houses have taker
comfort. But there we're indication.
In the months of August, September
and October-when new security offer.
!ngs were lower than at any time since
l9ll-that the period of fat profits ir
the underwriting field had ended.
During 1881 bond offerings totalec
$3.50, ,524,899, compared with s6,lO8,.
O26,694 in 1880. OF the total ST $50.
100000 consisted of municipal offer.
ingS. which compared with s1,486,573..
534 IN 1880. Long-term securities dur.
Ing the year amounted to S1,742, 900, 900
against $1,000 100000, and short-tern
issues in 1881 aggregated 1892, 600. 900
compared with s657OOO,O0O. There
might be something to say for thu
short-term market in year wher
United States Government bills were
sold as low as on an annual bank dis.
count basis of 40 per cent yield, were
1t not for the irrefutable fact thai
short-term offerings actually dropped
about 40 per cent.
Farm Loans Increase.
During the year farm loan issue.
aggregated s113,600,00O, compared with
S86, 100000 in 1880, and United States
possessions sold s795,0o0 worth O.
bonds, compared with their total ennis
sions in 1880 of S10,325,O00
Of the total of new financing in 1881
$3.50, 100000 consisted of refunding op
eratlons, as compared with $637 ,700,00(
in 1880. Railroads issued 6,5oo,oo(
of bonds, against their offerings O.
81 ,026, 100000 in 1890. Public utilitie.
sold SLABS, 100000, compared will
1881 100000 in 1890. There was {
virtual disappearance of investment
trust bond issues. Industrials, at abou
S400, 900 900, were less than a third O
their 1880 total. Foreign corporation
bonds totaled s375,OO0OOO, of which al
but S30000,000 consisted of Canadian
company obligations.
United States Government financing
while not included in any of the fore
going figures, was an important facto
IN the new capital market. Treasur,
emissions were heavier than in somt
years and it is extremely doubtful i
such wide fluctuations have ever before
occurred in single year for Govern
ment bond prices.
The markets fear of an early ISSUE
Of Government bonds was only equalee
by its desire to take losses-for incom,
tax purposes-on the bonds it hat
bought at par in September and which
in December were at an 11-point dis
count.
(Copyright, l93lO