Evening star., 1932-09-18
JUNIOR RAIL BONDS
feature ! ADVANCES
IhWEEK'S MARKET
u. S. Government and Mu.
niCipaI Issues Continue in
Firm Trend.
Special Dispatch to The Star.

NEW YORK, September 1.-THE
feature Of bond market that sagged
during most of the week. to recover in
the closing sessions, was the rapid
movement in Junior railroad bonds.
After having Cancelled more than half
of the gains made during July and
August, these issues started swiftly on
the upward path again Friday.
This movement again brings up the
question as to what the eventual worth
Of many of these descriptions may be-
An important clue is to be found in the
report of the Canadian Royal Commits
sion on railways which is to be pub
lished next Tuesday
While this report deals only with the
Canadian National Railways, a Govern
ment-owned property, and the Cana
dian Pacific, privately owned and op-
Grated railroad system, it suggests solu-
tions for the very problems that are
plaguing the American railroads and in
its recommendations makes admissions
believe that second and third grade
railroad bonds must eventually come
back if business improves.
There is only one cure for condition
where, for example, a 1000-mile trip
of a family of four costs $3.50 by rail
and $50 by automobile-lower railroad
fares. And then the public might not
respond because of the inf1exibility Of
railroad schedules. Nothing can be
done, so far as the railroads are con-
cerned, about the superiority of short
haul freight movements by trucks,
which are mobile, inexpensive to operate
and flexible as to schedule. The rail-
roads, however, can stress comfort and
speed in securing passenger traffic and,
by close knit mobilization of all their
facilities, offer better service to ship
pers of long-haul freight. Eventually
both these problems will require much
more highly concentrated railroad serv-
ice-high speed main lines, fewer local
branch lines and fewer separate railroad
corporations. And that is what the
Canadian report recognizes.
It's most important provision Is the
elimination of unnecessary competi-
ton in railway, hotel, telegraph and ex-
press services"
be abandoned. Some will be turned into
highways for truck and bus business
there is an 800-mile highway in Can
ada today constructed on an old right
of way. Bondholders will get little out
Of such changes. The properties on
which their bonds are a first lien carry
little more than junk value.
1t is therefore not hard to understand
why second and third grade railroad
bonds lost so much of their improve
ment so rapidly 1t was an advance
started from an admittedly oversold
level that was carried too far on a
premise-better business-that, even if
correct, would not make the bonds
worth the prices to which they were
driven.
The high-grade market held its level
all week. The 100000, 900 bond pool
during the week authorized statement
that it has not sold any of its purchases
and that if the market goes lower 1t
will buy more. This has been evidenced
all along by the rigidity of the prime
list, in which the pool was mainly in
terested. Municipal bonds continued
firm.
United States Government long-term
issues went to new tops for the year.
Copyright, 1927