Evening star. [volume] (Washington, D.C.) 1854-1972, 1935-08-25
Completion Due October IS.
Annual Savings Placed
at 100000, 900.
MARKET is UNSETTLED.
AUCTION PLAN SCORED
Works Relief Program Expected
to Prove Heavy Drain on
Reserve Balance.
BY FREDERICK GARDNER,
Associated Press Financial Writer.

4LC 4ACdodAy 10 10 COIl-
plete soon its $4,000. 100000 war loan
conversion-the biggest refunding
operation the Government ever under
took.
Early announcement Is expected Of
the offerings to be made in exchange
for the last batch Of Fourth Liberty
Loan "A per cent bonds. called for re-
demption October IS, approximating
in face value $3.50 .0O0, 900.
With this refunding, the last Of
about SOS. 000, 000. 900 in securities Is
sued to finance war expenditures will
60 of the market lists. Repayments
before the depression, sinking fund
operations and conversions will have
relegated them to financial history
within II years of the signing OF the
armistice.
The decline in the Government bond
market since July was accepted by
bond experts as indication the Treas
ury may have to raise coupon rates q
bit to make the final conversion Offer
ing attractive.
Before the decline set in the Treas
ury established records for low-cost,
long-term financing by the Govern
ment with az per cent conversion
issued and by selling long-term bonds
at auction on yield basis of less than
ga per cent.
Conditions Vary Widely.
The Treasury has run wide gamut
Of market conditions since II embarked
two years ago on its Liberty loan con-
versions. 1t encountered stormy
weather at the outset while markets
and business were in a reactionary
phase following the infationary boom
in the Spring and early Summer Of
1888 and the dollar was riding a rough
course in the foreign exchange market
without a gold anchor.
After that the sailing was smoother.
Investment markets Improved last
year when the dollar was revalued,
gold exports were resumed and excess
reserves of member Federal Reserve
banks mounted rapidly. to the accom-
paniment of heavy inflow of gold.
As. idle funds increased, money rates
fell to extraordinarily low levels.
The Treasury figures annual savings
on the war loan conversions at about
$lo0. 600, 900.
Because Of these savings and the
low cost of short-term borrowings,
carrying charges on the $29 .000, 000,-
900 Federal debt have not increased
r1nPh doc0itn IN If Oh
$4,000. 000. 900 in the debt total since
the end of 1890. The average annual
rate on the outstanding interest-bear-
ing Federal debt at the end of June
was 2.71 per cent, having fallen from
3.18 per cent year previous.
About 80 per cent of the called Lib
erty bonds so far have been converted
into the exchange offerings, leaving
the rest to be paid of in cash or to
dribble in slowly.
Alternative Offered.
The periodical exchange offerings
have been sweetened by giving holders
the alternative Of converting into short
or long term issues. Some observers
assumed that procedure might be re-
peated in the last of the Liberty loan
conversions.
After the wind-up of the Liberty
loan refunding the Treasury will have
a clear road to devote its financing at
tentions to outstanding short-term
and the money needs Of the
works-relief program.
There will be no more bond maturi-
ties until after 1910.
In the meanwhile, however, there
will be a steady procession Of maturi-
ties of short-term obligations, mainly
notes. Nearly half Of the national
debt Is In shorter-term obligations,
maturing up to 1910.
Presumably these would have to be
refunded or paid of. The assumption
In bond quarters has been that the
Treasury was waiting for q better
for long-term financing to
some of the short-dated debt
into more distant maturities.
With the works-relief program get
ting under way, it promises to be
heavy drain on Treasury reserves. The
Treasury's working balance remains
well over $1,000, 100000. But some
observers believe it would have to go
10 the money market soon for a sub
stantial amount of new funds.
Market Is Unsettled.
The unsettled condition Of the Gov I
bond market has raised the |
question in some quarters whether the |
Treasury would continue to rely on
sized offerings Of long-term |
bonds at auction for new funds.
According to some reports from Wall
Street, the market has not been en-
;husiastic about frequent 500, 900, 900
issues, offered to the highest bidder,
instead of at par with o coupon rate
adjusted to the market.
The Treasury departed last Spring |
from its old custom Of raising new
funds In substantial amounts at the |