Evening star., 1938-06-14
CONDITIONS FAVOR
FINANCING PLANS
Some Borrowers Advised
3 Per Cent Bonds Can
Be Marketed.
BY the Associated Press.

by the ASSoCl1ted fIebS.
NEW YORK, June 14.-Gossip on
money market conditions Is hearten-
ing to corporations of good credit
ratings which are awaiting favorable
spots" for placement of new security
issues.
Some prospective borrowers were
said to have been told by their bank
ers the market would be receptive to
bonds with 3 per cent coupon If
they otherwise met the requirements
Of buyers.
Since the capital market began to
stir again about a month ago after a
year of inaction upwards of 5000. .00o,-
600 of corporate bonds were marketed
IN highly successful fashion, accord
ing to the underwriters
A substantial majority, including
United States Steel Corps S100. .000.-
600 debenture issue. carried a 81. per
cent interest rate One or two issues
were mortgage AIS They were avidly
taken by dealers and investors.
Absorption Of these investments did
not cause any perceptible slackening
in the rise of idle bank funds, and
market watchers think the reservoir
OF investment money will continue to
the spillover stage as a result of the
credit expansion steps taken by the
Federal Government last April.
Bank Reserves Soar.
The rapid accumulation of bank
reserves is bound. as some see it, to
put little pressure on the already
low-term interest rates. Moody's In
vestment Service refers to it as "a
great squeeze downward" on money
rates, well exemplified by conditions
governing interest terms on Treasury
bills.
For all practical purposes" SAYS
the Moody survey. yield on Treasury
bills has ceased to exist and short
term notes have come to have attrac-
ton, as compared with cash only as
a speculation on rights on future new
offerings. Easy money in this
field may be said to have become viz
tually to mean free money a
phenomenon not previously known. "
1t is on this picture of redundant
credit supply that banking and under
writing circles predicate the sugges-
ton good name" corporate borrowers
could finance themselves on 3 per
cent basis through the medium of
long-term bond issues.
The present era of easy money was
marked by brief period in which
the market showed willingness to
absorb 3 per cent bond issues. That
was two years ago 1t ended with a
decline in prices of high-grade bonds.
Effect Is Uncertain.
Whether industry taps the capital
market in a big way, as many expect
or just moderately, there is no indi-
cation now 1t will meet with any i'm
portant competition from those who
use borrowed money for speculation
Credit at work in the stock market
has also been under a squeeze for a
long time as q result of steady con-
traction Of trading. At the end OF
May collateral borrowings of New
York Stock Exchange members, a good
index of the speculative credit posi-
ton, totaled sass, ,363, 600. This was
the lowest since records have been
compiled, with the exception of some
months in 1882 and 1898.
1t was in marked contrast with the
boom period, especially in the frenzied
days which ushered in the 1929 COL
lapse. In October of that year
brokers' loans reached unprecedented
heights-more than eight and a half
billion dollars.
While this huge amount of credit
was being drawn into the speculative
vortex interest rates were high and
still mounting, and business borrow
ers were heard to complain of having
to bid for credit against speculative
forces. This was particularly true in
1929, when the call-money rate on the
stock exchange got as high as 20 per