Evening star., 1948-08-15
Bond Trading Quiet
AS Investors Await
Clearer Outlook:
BY the Associated Press

NEW YORK. Aug. IA quie'
cautiousness settled over the bono
market this week in the face Of anti.
imitation moves and the still un.
settled foreign situation.
Volume Of trading dwindled ant
prices receded throughout the list
In five days, the volume was only
s13.5os,ooO compared with tn.
previous weeks sl4,441 900.
The total on the final day yes.
terday at s1,971, 900 was the loves
since 1917 with the sole exception
of the $1,934000 day on August 10
1910.
The Associated Press average
declined in each section. Railroad
were of 3, industrials 2, utilities
2, foreign bonds 5, and low yielt
bonds i.
Federal Bonds Down.
United States Government bond
in the over the counter market fel
as much as 1872 of q point. Mos
of the declines were punched In tn,
earlier part of the week after tn,
anti-inflation drive opened.
Secretary Of the Treasury Snyde
Monday announced the Government
would pay an interest rate of II
per cent on treasury certificates
one-year maturity, an increase q
Is OF one per cent over the Ia PEI
cent the Treasury has been paying
since the beginning of the year.
The reaction Of the banking com.
munity was prompt. They were IL
agreement with the move, which
confirmed the months-old New Yorl
banking policy Of flrrning up theh
interest rates. It was generally
agreed that new loans for com,
mercial purposes would increas,
around 4 Of one per cent and b
established on o basis Of 2 per cen
interest on prime risks. The rates OF
existing loans for the most part wer
undisturbed.
The second Anti-infiation NOV
came sooner than anticipated. o.
Friday the Federal Reserve Bank
raised their rediscount rates to ~
per cent from the " per cent rat
that had been In effect since Jan,
uary II when Il was moved to IN
from / per cent.
Cheap Money Era Ends.
The two moves together were ,
signal that the cheap money pol.
icy of the depression years Of tn,
1905 was ended. The change wal
made with deliberate slowness. Tit
memory Of the shock of abrupt in.
creases in the rediscount rate IN
1920 and 1929 was still green.
AS a consequence the price o
bonds moved lower to bring tf,eil
yield In line with the new levels
There was considerable varianci
in the adjustment, depending upor
the maturity Of the security ane
the numerous other ponderable fac.
tors.
The Treasury action was aimed
Of course. at the short-term loans
The policy still is to maintain tn,
21a per cent yield on long tern
Government issues.
Following out that policy, the
banks of the Federal Reserve Sys.
tenn during the week ended Wed.
nesday bought $249 ,233 900 of gov.
ernment issues to support the mar.
ket. The prop was substantially
smaller than the $402, 1854, 300 ir
purchases made the previous week.
Significance was attached by
many to the fact that all but So.
100000 Of the amount was spent
for bonds having more than five
years to final maturity.
Effectiveness of the anti-infia.
ton drive was awaited. Some lead.
ing bankers pointed out that the
higher interest rates on the short
term treasury certificates and the
increased rediscount rate would
have no more than psychological
effect at this time.