Evening star., 1933-02-25
BOND DECLINE laid
TO BANK TROUBLES
Recent Selling of Prime Sc
curities Caused by De-
mand for Cash.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, February 25.-There IS
an intimate connection between the
recent banking troubles and the cur
rent decline in high-grade bonds.
The buyers of these bonds, which
have included all Treasury issues, the
old and new obligations Of the strong
est public utility corporations and the
first-rate rails, in the last few months
have been chiefly financial institutions.
They have been willing to sacrifice
yield for security. In doing this they
purchased Government obligations SELL
ing at high premiums, or, to put it
another way, at low rates of yield.
They also bought the ranking mort
cages Of the strongest power and light
companies, which had been pushed up
into price area where the return
frequently was only 4 per cent, and. on
short maturities, less.
Demand for Cash.
In the railroad division the banks
concentrated on tie strongest Of the
equipment trust certificates maturing
in one to three years. These. too,
finally reached q price where their
yield was less than the average inter-
est paid on savings banks deposits.
When the demand for funds to meet
the requirements in Michigan developed,
this being reflected In decrease last
week in the deposits Of the New York
$l33. 900, there Immediately began
a liquidating movement throughout the
high-grade range Of securities which
were the most readily marketable.
Ordinarily, such q decline as subse-
quently occurred could be traced to
rising rates for money. In this case
there was at first comparatively little
change in quotations for time funds;
none at all in call rates, but higher
rates this week. It was mainly the in
creasing supply for emergency purposes
that pulled down prices, with the Of
ferings largest in those sections Of the
market where the demand previously
had been greatest.
For instance, in the United States
Treasury list the group Of high premium
bonds has declined 2 to 3la points.
This is an unusual fluctuation In Sc
also affected the discount bonds, with
are of 2la points. Coming into the
next most popular group, the high
grade public utilities, We flnd what
amounts to extreme weakness. Amer
ican Telephone & Telegraph debenture
5s and SIPS have declined to S points,
and most Of this since the regular divi-
The issues Of Consolidated Gas OF New
York. which had gone to such q high
premium that there was discussion Of
refunding through the medium Of low
er coupon issues, have had sharp
fall and one Of a size that infrequently
occurs In bonds OF this quality. The
SIS that we're brought out last year and
advanced to 1852 have dropped to par.
while the AIS are down approximately
the same as American Telephone S..
Other Declines.
Commonwealth Edison Of Chicago
512s, which had risen to premium Of
over IL points from their Offering fig
ure Of last Summer, are of about S
points. Other issues Of about the same
character have had similar declines.
Atchison General IS. q leader In the
high-grade railroad list, have lost over
4 points
The general effect of these corpora
tion bond declines has been to bring
the average Of the domestic bond mar
ket to level 3 points lower than a
month ago and to the low point OF
the year. While there Is no relation
between the causes that have disturbed
the domestic bond market and that for
foreign dollar bonds, a certain amount
Of sympathy has affected the latter by
reason of the action Of the former
Still, there are enough political situa-
tions Of acute nature abroad to ex-
plain the weakness in many European
dollar loans, as well as those of the
Far Eastern countries.
(Copyright, 1933)