£2.000,000 LOAN.

Press, Volume LVI, Issue 16852, 4 June 1920, Page 6

£2.000,000 LOAN.

PROSPECTS OF SUCCESS. SOME LOCAL OPINIONS. Local commercial and financial authorities aro divided in their opinions as to the prospects of success for the Governmont's two million loan. The weight of opinion, however, favours the probability that little difficulty will be experienced in placing tho in tiie Dominion. "The money is in the country nil ripht." a banking authority said. "All tho banks have lingo deposits, and it is a loan that should be taken up easily." Of course, he added, most people just now were looking for a higher rato of interest ; but there were others, those who had deposits in the hanks and the Post Office Savings Bank, and who were prepared to deposit their roonev for more than two years, who would be attracted bv the Government issue, and to whom 5 r>er cent, interest was more attractive than 4 per cent. —the current hank rate for deposits for two years. He thought that the conditions of the Government loan would prove attractive. Roughly. the lnnks of tho Dominion held £oO,(1CO.OOO of current and free detinsits, and £'2.0C0..0G0 was comparatively a small amount. The conditions were very favourable to the small man—tho man who was in tho habit of saving and putting his money on deposit—and bis opiuion was that a considerable amount would be taken bv Post Office Savings Bank depositors. There would be no disturbance of the money market, owing to the wide area from which the subscription- to the Joan would come, and there would be no interference with industrial developments.

A well-known farmer was of opinion tbab little or no difficulty would he experienced in placing the loan. ■ Money was so TtloTitifill at present, lie said, tb.it bo bad hoard that one institution bad declined a deposit of £200.000, tbe institution referred to having no demand for loans that would have permitted it to nee tbe deposit- profitably. A sliarebrnker remarked that he thought tliat Mr Massov had failed to realise that tbe majority of investors wanted a higher rate than 5 per cent., especially in view of the faet that Government 5 per cents, are at a discount at present. He thought that municipal and bodies' loans at 51 per cent, would appeal more strongly to investors. As compared with the Government's income tax free issues, many investors considered that 7:\ per cent, should be the rate of interest for a loan on which income tax would have to bo paid. His opinion was tbet, the issue of tbe £2,000 000 lean would have tbo effect of Sending the Government's ner cent., free of income tax, debentures to par.

Another banking authority mmarked that from tbe investors' point of view, municipal and local bodiss' loans b-ar-in<» 5\ per cent, interest would betaken up in nrcfcrcnce to a Government 5 per cent. loin. He adnvitt-d .that there was always quite a number of people who liked taking nr> Government loans at 5 per cent., their idea being that the security was U-tter. People wb« had money on deposit in tbe bunks at 4 per cent, would be attracted by tbe Government's o per cent, issue, but one thing was almost certain: 5 pnr cent., not income tax free, was not likely to attract big investors; they wanted n higher rate; most people wanted 5J per cent, or 5} per cent., and th>re Was quite a number of municipal and local bodies' loans hearing 6\ per cent.. Trhichj from the point of view of security, were just as good as a Government lonn. Tlvre was, however, a wider market for Government debentures n.s compared with these of municipalities and other local bodies, and tbe Government commanded a bicreer fi"ld. did not know whether the banks would be expected to take tip their quota of the Government loan; unless fh> hanks did it as a matter of policy, they were hardly likely to take up Government debentures at 5 per c-nt. He knew that at present there was a big demand for Government 4,J per cent, debentures, free of income tax, and the man who paid the maximum income tax considered that these debentures were equal to debentures bearing cent. There was certainly a bit crowd of small investors who would take tip the Government 5 ner ccnt. debentures, ltcferring to the liirrli bank rate in England, bo was of opinion that it would not nfFect the Now Zealand investor, especially those who bad £500 or £1000 in the Post Office Savings Hank. If properly pushed, he thought the Government should obtain the .-22,000 000 it wanted quite It would not, however, pay the banks to tak- 5t up at par, even with the idea of selling to-t-heir own clients, owing to the bettor investments offering. Th- Government loan world compete with debentures bearing higher interest which, in their own way, were quite as good aS ail investment.