Evening star., 1932-12-25
INVESTMENT BOND
PRICES DEPRESSED
DURING PAST WEEK
Heavy Offerings by Tax Sell
erS Have Fallen on Thin
Market.
Special Dispatch to The Star.


NEW YORK, December 24-The in
vestment market has been under press
ure this week at time when many
of the factors which had checked its
Autumn rise had been removed.
The war debts question, for instance
while it has not been solved to the
satisfaction of all concerned, is not an
immediate market influence. Business
activity has not maintained all OF the
gains of the late Summer, but it has
not dropped to as low levels as some
pesSimists had predicted. Anxiety over
attempts to balance the Federal budget
has been partially removed by the sub
mission Of concrete proposals to in
crease revenues and scale down eX-
penses. Congress has steered clear OF
cline in bonds?
Influence of Tax Selling.
The truth is that the entire flnan-
cial district has been surprised by the
volume of tax selling. not only In stocks
but in bonds. 1t had been thought
that the changes in the income tax
regulations made year ago would
remove this influence, but such has
not been the case. Either great many
more people than had been suspected
have tWo-year holdings In which they
may establish losses or many are estab-
fishing losses which, they will eventually
find, they cannot deduct from their
income tax. In any event, the effect
on the market has been general heavi-
ness. with minute declines in the less
highly regarded section of the prime
division and losses of several points
IN railroad and industrial bonds Of a
speculative character.
The tax selling came into a market
that was not prepared for it. 1t was
thin on both sides. Offerings were kept
well above the market and bids were
scarce and far below. Some degree of
support was encountered where intrinsic
values were still fairly sound, but in the
grade railroad group the effect
was drastic. Junior rails now stand
at prices yielding 35 to 70 per cent to
their holders in income-if the interest
is paid
Another factor that contributed to
the markets weakness was the tend
ency of those taking losses in securities
either to retain the cash SO derived or
TO buy Governments-preferring to &C.
cept little or no income for the time
being because Of the heavy appearance
OF the markets. This practice may
prove to be boomerang, as the banks
and insurance companieS-which have
experience enough to judge bonds by
their intrinsic values rather than on
market conditions-will undoubtedly be
attracted to the high yields prevailing
in sound bonds after the turn of the
year. Then there will probably be u
sharp reversal Of trend.
War Debts.
The refusal of France to pay her
war debt installment, while viewed
bearishly here, was used as bull ammu-
milton in Paris on the theory that con-
servation of the Republics resources in
this way would help its external
bonds. Hence while American inves-
tors, their faith shaken in France, have
sought to sell their French dollar bonds
Frenchmen have been absorbing them
In volume 1t Is estimated that more
than so per cent of all French govern
ment Is and 712s outstanding are now
in the hands of Europeans
Italy's surprisingly good foreign trade
showing excited patriotic buying OF
Italian dollar bonds. There has been
a substantial improvement in other
European obligations, although an ex-
animation of the conditions in Austria
Hungary, and the Central and South
! eastern European countries will revea
no excuse for buying their bonds.
Foreign exchanges have been steady
all week, although there were indica-
tions in Canadian dollars Of year-enc
pressure. Australian government bonds
have been steady. South American
issues remain in the doldrums.
Copyright. 1897