Evening star., 1947-12-07
Bond Market Drops
Further in Week,
Rails Off Sharply
By the Associotsd Press

market tooOy ended announcer week
fiat on its face.
Losses were small during the short
session but enough to force prices
on the average to the lowest levels
In 8 to 7 years.
Downward tendencies in stock
prices this week did little to whet
investor appetite for bonds and in
addition the news from abroad and
from the domestic business front
acted as a brake on investment
demand.
Railroad issues were among the
hardest hit. The Associated Press
average of 20 representative carrier
obligations dropped S of one point
during the week to 88.1, unmatched
since 1914.
Concern over railroad earnings
was brought to focus with the
latest report of the Association of
American Railroads, which esti-
mated October net income Of Glass l
roads at $48, ,000, 900, a drop of $10,-
100000 from october last year. A
wage increase Of l51a cents an hour
for incorporating railroad employees
went into effect September /. To
offset this and other increases in
operating costs, the railroads hiked
freight rates by 10 per cent on
October l3 and are now asking the
Interstate Commerce Commission
for another lift of 20 per cent.
Low Yield Bonds Drop.
Low-yield, high-priced bonds also
declined as pressure continued fol
higher interest rates.
In this connection further evidence
developed which indicated that the
Federal Reserve Board was not
going to allow long-term Federal
issues to break through the 2h
per cent level. The most recent re-
port of the Federal Reserve System
showed an increase Of 100000
for the week ended December in
system holdings Of long-term Gov.
ernment bonds, or an increase OF
nearly 1910, 1000, 900 since the begin
ming of November.
Government bonds barely budgee
during the week, with the 2zs o1
December 1912 unchanged at 101
bid in over-the counter tradings, OF
yield basis of 244 per cent.
The new financing market re-
ported fair activity during the week
and prospects Of expanded business
to come. Most new issues moved
easily into retail channels.
Less pleasing to investment bank
ers was the wide variety Of private
corporate financing deals. Union
Carbide 81 Carbon Co. announced
arrangements to borrow $50, 900 ,00(
from three insurance companies or
promissory notes bearing an interest
rate of 2.70 per cent and payable
in 20 years. Rayonier, Inc, bor'
rowed $2O,000,000 from the Metro
politan Life Insurance Co. and 6
group of banks, and United Mer'
chants 81 Manufacturers, Inc, dis
closed a $1o,O00,0 900 loan, with 20
year maturity and 20 per cen
interest, from Metropolitan Life.
Market Is Unfavorable.
Many financial observers believ'
that these funds should have beer
raised by equity financing-that Is
by sale to the public of common o.
preferred stocks. Stock issues TO-
months, though, have found nom
too much favor in the eyes OF th'
investing public and the cry ha
been raised in some quarters tina
there is a shortage of so-called ven
ture capital.
During the past couple OF years,
Sherman C. Badger, an executive
of Mutual Life Insurance Co., re
Gently told q conference Of saving
banks officials, New issues OF com
mon stocks have been coming ont
the marketplace at a faster rate thai
new equity funds have been accumu
lated. The supply Of new preferred
issues has exceeded the supply o
funds available for this type Of in
vestment."
Among suggested solutions: Lowe
taxes on large incomes and an in
crease in the long-term interes
rate. In other words, release NOR
capital for potential investment ant
make potential investments more at
tractive by increasing the yield, o
return.