Evening star., 1932-02-14
INVESTMENT BOND
MARKET IS HIGHER
Hesitant Upturn Indicates
Waiting Policy on Part
of Buying Public.
Special Dispatch to The Star.

SpeCld! DlSpdtCn 10 Inc star.
NEW YORK, February 13.-The
bond market ended the week with a
much stronger tone than has been its
lot since the January recovery. At the
same time its hesitant upturn was ample
evidence Of the reluctance of investors,
individual and corporate, to take large
market positions until such time as a
more definite picture of what the Re-
construction Finance Corporation is 60
ing to achieve is presented.
Before the Washington announce
ment of the bill to extend the facilities
Of the Federal Reserve Bank system
and unlOose flow of bank credits into
industry, trading in the investment
market had dropped to almost record
low proportions. That it picked up
sharply on Thursday. after the stimu-
lating news from Washington, was en-
couraging.
U. S. Issues Gain Slowly.
United States Government long term
bonds-which are usually the measure
of the markets confidence in any par
tlcular advance-improved only mar
rowly and slowly. however. and this
gave pause to those who believed many
OF the Junior corporation bonds were
on the bargain counter
Nevertheless Standard Statistics in
dex of 60 representative bonds recov-
cred virtually all of the ground it had
lost in the first. three sessions of the
week and in the case of the rails there
were some notable recoveries, extending
to 4 and points.
1t is in the railroad situation that the
market holds the greatest hopes for
VII 10 CIV
poration and the liberalized credit
scheme can do. The prime issue in
this situation is the prevention of re-
celvershlpS among the carriers, for the
bonds OF more than 100 roads are cur
rently selling at receivership levels
However. Wall Street confidently eX-
poets that the reconstruction organiza-
ton, especially in the first months of
its operation. will act favorably on ap-
plications from carriers that have been
approved by the Interstate Commerce
Commission. The aid they will thus
receive, together with the reduction in
wages for the next year and higher
freight rates, should go far toward en-
aollng the roads to make better show
ing in 1882
So far as the security markets are
concerned the greatest benefit in the
immediate future is likely to come
through the aid the Reconstruction
Corporation will extend to banks and
other financial organizations with sound
assets to hypothecate These institu-
tlonS will not be forced to dispose of
large blocks of bonds as in the past
and the investment list should thus
gain real relief.
Money Rates.
The other factor that must be con-
Sldered in the investment market is
the slow and careful pairing of money
rates. evidenced by the Dallas Reserve
Banks cut in its rediScount rate to
3l2 per cent This occurred at a time
when both New York and London
maintained their rates in the face of
a good body of market opinion that
lower rates could be effective. There
Is no evidence of haste on the part of
the Federal authorities to force the
money market lower Immediately, but
undoubtedly the long-term outlook is
for cheaper money.
Since cheaper money usually means
higher bond prices, and higher bond
prices are usually Complementary to
lower commodity prices, this should
serve to offset the mildly inflationary
nature of the Governments emergency
program. 1t is not unreasonable to
look for a broadly higher bond market
within the next two months, but the
slower its pace the more permanent will
be its improvement.
(Copyright 1927