Evening star., 1932-07-03
BOND MARKET GIVES SIGNS
OF DELAYED RECOVERY
Balancing of U. S. Budget, Defeat OF
Bonus Bill and Government Aid for
Railroads Prove Helpful.

being considered by Congress promised
a sharp break in these bonds
All these constructive factors were
considered by those who started bid
ding for bonds early in June anc
brought their prices back some five
average points from their lows. The
outlook was brighter as June closed
with Congress adjourned and the dan
ger of any radical legislation definitely
removed for the time being A cautious
tone remained, however, owing to the
tendency of those desirous of buying
bonds to await the day when the issues
of the coming election campaign will be
clearly defined and some hint, at least
is conveyed of what may be expected
from abroad within the next six months
Events in Europe.
The conference at Lausanne early in
the year was notable FOR its failure tc
do anything, but its successor in June
opened under much more auspicious
circumstances. At the start the dele
gates agreed to suspension Of the July
reparations Pays from Germany
and indicated th"t no such payments
would be expected Until final settlement
had been reached. This was followed
by encouraging developments in other
directions, the most important being
the cooperative aid offered Austria by
Great Britain. Italy and France-the
French showing a willingness to lend a
helping hand for the first time since
the affairs of Europe reached crisis
in 1881. Another development on which
much stress was laid was the favorable
reception of proposals for mutual low
ering of European tariffs.
These events in Europe were renected
in a buoyant trend in security prices IN
London, Paris, Berlin. Amsterdam and
Milan. and there was a belated response
here in a substantial improvement in
European dollar bonds headed by the
German group. This advance added
nearly 5000. 900, 900 to the market valu-
alton of the dollar bonds of 10 European
nations. over half of which was in the
obligations of Germany, her states and
corporations.
South American investments we're
still disturbed by political reverbera-
tions of the economic impaSSe to which
these countries have been brought by
the virtual stoppage OF their trade, low
commodity prices and inability to sup
port their own currencies. Chile, the
most recent of the republics OF that
continent to experience fresh revolt,
only followed the examples that have
been set by her neighbors in the past
two and half years.
The inauguration of foreign trade by
barter. which reached important dimen-
sions In Germany in June, Is now be-
ing considered by the South American
republics as a means OF realizing on
some of their frozen assets and paying
frozen loans placed there by American
and European bankers with whom they
are desirous of doing business. While
this movement cannot be expected to
go very far because of its obvious physi-
cal limitations, it is regarded as the
entering wedge that may eventually
force down the trade barriers OF tower
ing tariffs and excessive exchange losses.
Demand for Municipals.
During the period under review, with
the spectacle of a 2112 per cent depre-
citation in the value of outstanding
bonds, the selling to investors of new
bonds was almost at standstill. But
the increase in income taxeS-now
brought to the almost inconceivable
level where a resident of New York hav-
ing an income of over 81 900, 900 a year
must turn nearly 80 per cent of 1t back
to the Federal and State governments
created demand for municipals which,
unlike Government bonds, are entirely
tax-exempt under the laws of both the
State of origin and the Federal Gov
ernment AS a result, out of $825, ,290,-
900 new bonds fioated In 1882, about
$3.50, ,000, 900 consisted of municipal is
sues and another SOS 900 900 of Federal
Land Bank issues. The total compared
with $2,74l ,567,351 in the first half of
1881, of which municipals we're less than
third. In June alone, of the S85,-
661 900 Of bonds issued, more than $75,-
900 600 were Of this class.
(copyrishf, ie32)