Evening star., 1938-04-21
j. U.S.F|SCAL PLANS
Of AID TO BONDS
Attitude on Obligations of
Government Shifts to
Eagerness to Buy.
BY CHARLES F. SPEARE.

Special Dispatch to The Star.
NEW YORK, April 21.-While the
effect of the Roosevelt administration S
new financial plan has been negative
with respect to business and is over
shadoWed by other factors in the mar
kets for corporation securities, it has
been positive in the field of United
States Government bonds and notes
These have had pronounced advance
They are quoted at the highest average
prices Of the year, with favorite long
term issues from l to points above
the 1888 lows
Since last Thursday. the attitude of
the banking and insurance interests
toward these obligations has shifted
from one of apathy and some anxiety
as to their future, owing to the rising
Government debt, to renewal of the
former eagerness to accumulate more
In anticipation of higher prices.
Early last year, the market broke an
average of over points when the
Government began to put into effect its
increase in member bank reserve re-
quirements. With the reversal of this
policy now adopted in Washington and
other measures recommended for cas-
ing credit, and at the same time a
great scarcity of new corporation loans.
banks and life insurance companies
have come to the conclusion that the
most practical use they can make of
their loanable funds is to add to their
already heavy commitments in Treas
ury paper.
Outlook for Prices.
There has also been decided change
Of opinion regarding the outlook for
Government bond prices. During
considerable part of 1887, one might
have heard predictions of a probab BILE
fall in Treasury issues. Fear was fire.
quently expressed by speakers at
bankers conventions that drop could
be of such proportions as to- wipe out
the capital and surplus of the weaker
institutions. Today there is a con-
trary view. 1t is that deluge of cheap
money will lead to quotations for long
term Governments never before real
lied
Discount rates on Treasury bills
have experienced sensational de-
cline. An issue of 100000, 900, over
subscribed three and three-quarter
times, sold on Monday on .06l per
cent basis, compared with l46 on
like issue week ago. Treasury notes,
due in March. 1910, and carrying
coupon Of IS per cent, are today
quoted to yield about ss of l per cent.
The Treasury 212s of 1948. the lowest
coupon of any of the long-term issues,
are at premium of 2l2 points, which
suggests ability on the part of the
Government to refund it's 1888 short
maturlties at a considerable saving in
interest and with advanced due dates
Debt Not So Bearish.
Apparently, buyers of Government
bonds are not so much concerned over
the increase in the Government debt
as they were a year or two ago It has
long been the belief that a national
debt of 000,000000 was the ex-
treme limit of safety for this country,
beyond that figure, Government credit,
it was said, would be affected There
Is now more of a tendency to compare
the debt of the United States with
that of other countries and in relation
to respective wealth and resources as
we'll as debt per capita, all to the ad-
vantage of the United States.
Investment tradition has long en-
phasized the bearish effect on fixed
interest bearing obliga tions, including
those of Governments. of credit inf1a-