A Successful Loan.

Press, Volume LVIII, Issue 17394, 3 March 1922, Page 6

A Successful Loan.

The issue of a Colonial loan is not so infrequent nn event as to excite usually much interest, except on the part of the Government that is seeking money and perhaps those other Governments which may be thinking of testing the market. But there are circumstances connected with the flotation some ten days ago of a loan by the Government of Victoria which raises'that operation out of the common. The loan, for £4,000,000, was over-subscribed fourteen times within two hours of the opening of the list, the total amount applied for being £55,000,000. This extraordinary demand was certainly not due to the terms of the loan being exceptionally favourable to the lender, in fact in respect to the return it offered, it did not compare with any other recent Australian issue. It was issued at 99, bears interest at the rate of 5$ per cent., and is redeemable at the Government's option in eight or eighteen' years, the return varying from £5 12s lOd for the shorter period to £5 lis 8d for the longer one. The yield to tho investors in some other recent Australian loans ranges from £6 3s 9d to £6 8s lid, and in the case of the loan raised by Queensland in New York it is rather more than 7 per cent. Tho success of the Victorian loan is attributable to two causes. One of these, possibly the more important, was the time at which it was floated. Its issue had been arranged for by the Victorian Treasurer when he was in London last year, and whether by accident or design it was offered to the investing public at exactly the "psychological moment," when the remarkable boom in gilt-edgod investments was at its height, and when the activity on 'Change was so great that, as the cable told us, "the scene in the usually staid " Consols market was reminiscent of the " rubber market in the boom times." The upward movement, which was s&rted by the suspension of the issue of 5 per cent. Treasury Bonds was accentuated by the almost immediate reduction of the Bank rate. Underlying the whole movement was the public's distrust of industrial stocks, in the present depressed and unsettled condition of trade. This feeling was indicated by the great fall in the amount invested in industrial capital issues last year, the totah in round figures, being £82,000,000, as compared with £271,000,000 in 1920. This meant that enormous sums of unemployed money were awaiting investment in securities, such as Government stocks, which possessed the desired quality of safety. The second cause of the unexampled subscription for the Victorian loan lies in the fact that- in the eyes of investors it possessed this quality in full measure. Victoria's credit undoubtedly Btnnds high on the money market, largely on account of the care with which the State's finances have been administered. For four yearn in succession the Treasurer has been able to show a surplus, yet for five years the general taxation has not been increased, except to a slight degree in regard to the r betting taxes. A man with a taxable income of £soo.pays £3l 5s income tax in New South "Wales against £6 5s in Victoria. It no doubt also counts to the credit of Victoria in the London, money market that the State has gone to. it to raise a new loan only three times in the past seventeen years and that its indebtedness in London is less how than it was when the Commonwealth came into being. It is probable that the over-Bubscription of its latest loan was due in a measure to the operations of the "stags," the men who apply for allotments in new issues with the sole object of re-selling as soon as ! they go to a premium. But making all allowance for this feature, the flotation remains a tribute to the soundness of Victoria's finance of which the Treasurer has every right to be proud. There is also a lesson in it for the Treasurers | of other States, if they choose to profit ny it.