Evening star., 1934-03-18
INTEREST CENTERS
IN BOND ADVANCE:
STOCKS UNCERTAIN
Dollar DevaIuatIon Plans
Appear to Work In Re-
verse Fashion.
BANKS ARE STRONGER
AS HOLDINGS IMPROVE
Steady Gain in Finance Situation
Eclipses Hopes for Higher
Level in Equities.
BY CHARLES F. SPEARE.

NGW 4Ouh, MdICu 1I.-lL u rare
in market history for bonds to take
precedence over stacks in trading VOL
ume and in public interest; even
more remarkable for them to be able
to advance as much as stocks. Such
has been the situation this week.
Stocks have been for the most part
uncertain in their course. Bonds
have gone higher and higher. They
are an average 10 points above the
low Of January. So are stocks. The
curious element in this uncommon
market condition is that the entire
mechanism of the dollar devaluation
program should work for higher prices
OF commodities, lower values for bonds
and create speculative enthusiasm for
stocks.
1t would not be so strange II the
fixed interest issues most in demand
| today were those of the open mort
gage, refunding or debenture type.
This is not the case. These have
Jagged behind the closed mortgages,
the underlying liens and the bonds
prior TO which there are only mod
crate amounts outstanding. BY all
of the accepted theories such groups
OF bonds should be falling day by day.
On the contrary they are advancing,
to the diSmay Of the life insurance
companies, the savings banks and the
trustees who thought a few months
ago they held too many of them and
now fear lest they cannot buy more.
Phase Of Credit Initiation.
Whether or not we are headed for
years Of low interest rates, the fact
Is that we are today in such a pc
riod. 1t is a part of credit initiation
! that promises to become more posi-
tive. vigorous rise in stocks would
be more popular than an advance in
/ bonds and might lead to more spend
ing and SO more trade. But the i'm
provement in the bond market Is the
last necessary step to correcting the
weakness Of majority of the banks
whose surplus and reserves were once
at the point of exhaustion. Funda-
mentally, therefore, the progress
made in domestic bonds In recent
months measures up in its value to
/ permanent business recovery with any
other two or three factors that have
been promoted by the administration
I to effect recovery.
If there were a reasonable securi-
ties law on the books. numerous cor
poratlons would now be considering
Te1undlng their 5 and 51z per cent
loans, selling well above call prices
into long-term 4 and Az per cent
obligations. 1t is the time of oppor-
tunlty for the Government to do the
same thing and get rid Of its 4K
per cent bonds.
There were many timid souls a few
months ago who feared for the fu-
ture Of Government credit. They
would not buy any Treasury issue, as
they were certain all long-term Gov
eminent loans were on the way to
discounts of from IS to 80 per cent.
Some OF them sent their money to
France on the premise that it was
safer there than in the United
States. Today their policy looks lust
a little foolish in view of subsequent
events.
Treasury Credit Rising.
In spite of the great amount OF
new borrowing that the Treasury has
been compelled to do in order to
fulfill its pledges to various relief and
works agencies, its credit, as ex-
pressed in market prices. has been
steadily rising since the first of the
year: The three issues of Liberty
ponds, though with a short tenure,
nave gained an average of 8 points
In less than three months. More
convincing is the average gain of AZ
points in list Of eight long-term
loans. Two Of these this week have
sold at less than 8 per cent Yield
basis. Nine-month Treasury notes
are quoted at 0.2S per cent and one
year paper under u of 1 Der cent.
Treasury bills maturing in September
are 0.40 per cent bid.
Without doubt the tremendous
amount of free capital is partly re-
Spons1ble for the premiums on
Treasury issues, as it is now on all
forms of investments of high char
acter. This, however, would not
offset the effect of public suspicion of
the Governments financial position II
there were evidence of inability to
meet its engagements or If the ad-
miniStration seemed to be venturing
on policy Of direct imitation through
the emission Of paper money. That it
Is wholly out OF sympathy with such
q course was clearly indicated In the
argument presented on Wednesday BY
President Roosevelt against printing
press money" He realizes as fully as
r1FnfnCCf0pRa1 Ia
once begun, the employment Of such
currency to pay bills or bonuses
becomes a habit and leads eventually
to the ruin of Government credit.
Trade Expansion Continues.
There is every indication that busi-
ness will go on expanding in the
Spring and will rise to even higher
levels during the Summer. Only a
moderate proportion of the money
appropriated for public works has 50
far been expended. As the allotted
sums are drawn upon, the effect will
show in an increasing amount Of
employment, better retail trade, more
railroad traffic and a reduction in
the amount Of unproductive real
estate.
The current volume Of industrial
activity is about go per cent Of nor
NAL. Col. Leonard P. Ayres points
out in his March bulletin that there
has been a vigorous advance since
November, with industrial production
in February only 81 per cent under
normal compared with nearly "a per
cent last Autumn. This month has
witnessed further improvement, ir-
respective Of its comparison with the
bank holiday period Of q year ago.
(Copyrtrht. 1884, by the North Ameriean