Evening star., 1935-05-30
TREASURY FINANCE.
METHODS DEBATED.
One Group Praises Bidding.
Other Claims Market
Is Unsettled.
Rv !. 6. DONLEy.

Special Dispatch 10 The Star.
NEW YORK, May 30-Tbere are
two sides to every question, and the
latest bit Of Treasury financing brings
that out. The Government is offer
ing long-term bonds to the highest
bidder, instead of at stated figure,
for the first .time-that is, on direct
obligation-since 1911. when s50.000,-
900 Panama Canal bonds, carrying a
per cent coupon. brought 10212
The 3 per cents now offered will be
for double that amount, with the
Treasury limiting its acceptance OF
bids TO 10 per cent in excess of the
offering.
The usual custom on Treasury
offering has been for Treasury rep
resentative to com. 10 New York,
shortly before the terms are fixed, to
visit around among the banks snd
get a line on the market" On the
basis OF such findings, the rate is
fixed. That method has its advantages
and its disadvantages. 1t meets bank
ing views on the market, bit, If there
is any sudden change before the offer
JllS ddtC, VI - illC lto RpSAh'
to miSgsuge things, there is likely 10
be undesirable unSettlement of the
Government list of bonds.
One View UnfavOra Bile.
One view of the fixed-coupon. high
eSt-bid method-Wh'ch predominat ed
in the early part of this week-was
unfavOrable. Selling by those hold
ing this view largely accounted for
the loss of 1872, recorded by the
Treasury 3 per cents OF 1868. which
correspond 10 the bonds now offered.
and are, as one might say of cor
poration bond, issued under the Sa me
mortgage"
This viewpoint regarded the offer
ing of 500, 1000 in Treasury per
cents for a bid" as tantsmount 10
an order 10 sell a like Guantity at
the market" Those who took this
position argued rhat such financing
was not even as definite as market
order might sometimes be. for there
was no way of judging how many
more of The same bonds were going
to come from the same source. They
pointed out that it NAV well be the
purpose of the Treasury 10 finance
the enormous Nork-relief needs by
the same means But heavy demands
for rhst purpose probably will not
make themselves felt in the capital
market for some time.
Cite Light Volume.
Those u,bn ,ooL I;11l,, 10 III, ,o,o
move of The Treasury commenced in
an entirely different tone In the first
place, they noted that, although Gov
ernmentS we're off rom four thirty
seconds TO eight thirty y-secOnds, at the
close, the selling during the day was
in light volume and Jnimportant. In
The second place, the test offering Is
relatively very small. The pressure
of idle fluids for investment, mean
while, is so great and so jnsistent that
there can be no question that a
Treasury Offering bearing per cent
coupon will be we'll received.
They believe the Treasury will do
better in the long iun if it sticks
10 the method of offering for a
bid" instead of trying to vary the
coupon rate and the price to match
the markets temper TO the last eighth.
For the tendency in attempting 70
gauge The market is always to err on
the side OF liberality, which may be
quite expensive in large borrowing
operations. Moreover, there is the
psychological effect to consider, and
it is better on this score to have q
higher coupon and command a pre-
MUM than to slice the coupon and
later see the bonds sell at discount.
'Copyright 1881