AUSTRALIAN FINANCE.

Auckland Star, Volume LXIX, Issue 221, 19 September 1938, Page 6

AUSTRALIAN FINANCE.

CONVERSION OPERATIONS. FIXING THE INTEREST RATE. Tentative plans with regard to the terms of the forthcoming conversion loan in Australia, which is understood will amount to between £65.000,000 and £70,000,000, have been fixed by the Commonwealth Bank for recommendation to the Loan Council meeting in Melbourne on September 29. The total has been reduced from the original £73,000.000 by redemption through sinking fund purchases. The two main points considered during the recent discussions have been the rate of interest and the period of the loan. As less than 20 per cent of the maturing loans is believed to be in the hands of private investors, the banks and insurance companies, who hold most of the remainder, will naturally desire to see generous terms offered. A nominal rate of interest of 3% per cent has been suggested, with the price of issue at a small discount, to allow the true rate to be closely in line with the present market rate. The average interest yield from the 4 per cent issues now stands at approximately £3 15/3 per cent. It is considered likely that investors will be offered a maturing period some time between 1955 and 1960, with the possibility of an even longer optional term being included for the benefit of trustees. It has been pointed out that the 1913-53 period is •practically full with maturing loans. Official support will be given to the market if necessary, to prevent any undue ris« in the interest yield. There has been a natural shrinkage of funds in the money market as a result of the fall in export prices, and interest rates have shown a hardening tendency. So far it has been very slight, and any definite development in this direction would be checked by official action.