Progress Loan

Press, Volume XCIII, Issue 27993, 13 June 1956, Page 12

Progress Loan

The Government’s new Progress Loan—the equivalent of the former National Development Loans—is modest in size and meets with studied accuracy the present market yield for Government stock. The (loan’s attractions are increased* by i alternatives which will appeal to (different classes of investors. For (the five-year period, interest at 4i (per cent, is offered; for 11 years, |4| per cent. These terms are the same as those which produced a subscription of fourfifths of last October’s conversior iloan of £50.000.000. Last year’s •’National Development Loan included 3|a three-year period, with a returr at issue price of £3 18s per cent jThe present loan also includes f 'three-year period, but at 4g per cent The keen market demand for short iterm Government stock in the las two months has been met with th< (new loan. There can be little com plaint about the terms. They reflec (the Government's more realist!

last six months. They will, however, cause renewed -complaints about the relationship of Government and local body loans. For the 11-year period (which is roughly the term favoured for most local body loans) the customary margin of i per cent, in favotfr of local body loans has been reduced to § per cent. -The Government did nopreserve this customary, margin in the case of the conversion loan, and this now seems to be settled policy. In other ways, however, the Government has studied the local bodies’ interests. It is fortunate for local bodies seeking finance (in Christchurch alone, local bodies want about £800,000) that the Government has held its demand on the loan market to no more than £ 10,000,000. The Government could have asked for more, and could have used more. But in determining its minimum loan requirements for the year it has had regard for the claims of local bodies and private interests to a share of the capital available. With so many competing claims for capital, this is not a time to expect a rush of subscriptions for a r.ew Government loan. But the continued progress of the nation demands continued investment of capital. The Government is entitled to support, in general, for the principle of investing in progress, and support, in particular, for a loan of modest size. With a minimum subscription of £5O, the loan is not designed especially for small investors, though it may well appeal to them. Persons with money a! call may well appreciate the advantages of committing funds foi no more than three .years for' s useful increase in their interesi returns. While direct transfers frorr the Post Office Savings Bank to the loan would not be of immediate help to the Government imats searci . for capital, any increase in interest i consciousness and saving-conscious ■ ness is to be encouraged. It is a pit? i that the Government has not beet ; as ready as some local bodies t< I recognise the advantages of a mini i mum subscription below £5O. Thi . could scarcely fail to stimulate th, i flow of money to Government loans . Apart from small investors, there : - a large class of investors wh, t normally invest in Government stocl s for the good reasons of security - returns, and public duty. Th ; appeal of the Minister of Finance b c this class of investor cfeserves to b ■ Iftdty «ir>p«rted.