Evening star., 1932-03-12
BONDS
HAVE GOOD MARKET.
Tax.Exempt List Follows
Junior Corporation Issues
Into Higher Ground.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, March 12.-The cur
rent market movement in tax-exempt
bonds began In the highest grade is
sues and is slowly working down INTO
the lower groups. On the other hand
it has been the buoyancy OF the in
ferior types Of corporation mortgages
that has finally had stimulating et1ect
on what are known as "gilt-edge
bonds.
The first group gained encourage
ment from the upward turn in Unlteo
States Government bonds and In
Treasury issues. SO long as these
were under pressure it was Impossible
to move even the highest types Oh mu.
nicipals. Today, the government ilst
is from to 8 points above the low
of the year, with Federal Land banh M
and intermediate Credit CorporaCioii
obligations following at slower pace
The new Treasury 3a4s are quoted "a
premium. IL
The break in the impasse on city
and State bonds came with the offer
ing of S10O, 900, 900 of New York City
one to five year notes at par. AT pres
ent the longest maturity in this issue
is quoted at premium OF 12 polntS'
Later. after long negotiations, 1nvolV-
ing substantial reductions in its budget,
the City of Newark. N. j., sold $5,OOO,-
900 bonds with a 6 per cent coupon,
of which the maturities from 1883 10
1885 were offered on a per cent basis
and the remainder, to the year l9fZ,
at a SIS per cent return. The latter
are now quoted to yield 5.25 per cent.
Normal Trend Reversed.
A break in the situation with re-
spect to State bonds came this week
in the sale by Missouri of a compare
lively small issue, for which there was
active bidding and which are being
sold on a 440 basis. In view Of this
swift change in the status of such
bonds, borrowers are inclined to take
the attitude that the bankers made
rather higher exactions of them than
market conditions warranted.
Normally the trend in corporation
bonds is from the highest grade down
through the lower quality strataS. This
year it has been the reverse, owing to
the peculiar circumstances that sur
rounded issues in the latter category
These had been severely Dictated be-
cause of their failure to meet the tech
nical requirements of legality and by
threatened defaults of interest. 1t is
in this class that the largest amounts
held by commercial banks are to be
found and from it that the heaviest
liquidation originated, where banking
difficulties played part. With the ex-
tension of the legality period and the
aid given railroads by the Reconstruc-
ton Finance Corporation ard the Rail
road Credit Corporation, the position of
such bonds was improved. At the same
time 1t became apparent that there
would be no further receiverShipS For
the first time in many years there has
been large volume of speculative buy
ing of second and third grade railroad
bonds by individuals who ordinarily
would be found in the market for
stocks. Aided by this and by relief
from further liquidation, numerous
junior mortgages have doubled in price
since January. In one notable instance,
Nickel Plate IS of 1882, an apprecia-
ton Of 400 per cent has been achieved.
1t was not until the speculative cor
poration bonds had had a substantial
advance that the issues prior to them
began to reflect the general change in
sentiment and the easier conditions of
money. Their strength is now one of
the outstanding features of each bond
market day. In the latter part of 1881
and well into January public utility
companies with maturing obligations
were experiencing difficulty in renew
Ing these obligations. Some did so at
a substantial increase in the rate of
interest; others defaulted.
81 ~oA L.
to show its first change for the better,
a syndicate brought out an issue of
SIS 100000 New York Edison per
cents at 81. These were rather grudg-
lngly taken, but they never fell below
their issue price. Later an issue
similar in amount, in coupon rate and
IN price, was offered in behalf of the
Brooklyn Edison Co. 1t was quickly
snapped up. Today both of these bonds
are quoted at a premium of about 4
points. A smaller loan to the Duquesne
Light Co. was subsequently sold and on
the day of issue advanced points
This week other high-grade public
utility bonds have also gone to a good
premium.
Banks Encourage Buying.
In all, therefore, the bond market
--e'S o0SoAliy 4Ou1lOCO UuI OuI ulS LIlt
past month so that domestic issues of
both high and low degree have been
under accumulation by investors and
by dealers, with the latter obtaining the
nrst encouragement from the banks to
carry securities that they have had in
over year. Along with this has come
revival in interest in the better grade
South American and European loans,
whose spirited advances have done
much to encourage institutions hold
ing them and which are now able to
show quite different picture with re-
spect to depreciation than at the end
OF last year.
While it is assumed that the Fed
eral banking authorities and State ex-
aminers will again permit banks to
carry their bonds on the same basis
as in the December call when they
report for the March quarter, many
OF them, by reason of the appreciation
lately, could afford to show them at
c0St