MONEY MARKET

Gisborne Times, Volume LVI, Issue 6318, 22 February 1922, Page 5

MONEY MARKET

. • BOOM IN GILT-EDGED SECURITIES. MR BEAUCHAMP EXPLAINS POSITION. N CHANCE- EOR DOMINION BORROWERS.

WELLINGTON, Feb. 21. - Harold Beauchamp, chairman of the Bank of New Zealand, spoke ,Y,? r y interestingly to a Gisborne limes representative on the present financial position here and at Home. Ihe great boom in all gilt-edged securities in the Old Country, said Air Beauchamp _ is unquestionably owing to the plethora of money in London at the moment, which' is occasioned by industrial inactivities and the great falling off in trane during the past year. The fact ox so much money which, otherwise, would have been employed in industrial enterprises is, no doubt, through lack of confidence, being invested in first-class bonds and securities. The bank rate, as will be noticed, lias recently been reduced to 4J- per cent, and day to day iou,,.i are now made at round about 21 per cent per annum. This is a substantial drop, as compared with the rates ruling twelve months ago. Undoubtedly, added Mr Beauchamp, this is a most excellent time for oversea Dominions and others who require to raise loans to place them on the London market as, if there he any return to confidence in respect to industrial enterprises, money, in my opinion, will rapidly harden in value. It is fortunate for the Corporation of Wellington that, through having met with a series of difficulties, it was uuablo to go on the London market as it wished to do some months ago. Its failure to do: so has no doubt been a blessing iiq disguise and if, to-day Wellington* is in a position to place, a loan on the market it ought to be able to do so at roughly 1 per cent, lower than it would have had to pay if it had been borrowing, say, three or six months ago. That means a very substantial saving when we understand that the loan is in the vicinity of threequarters of a- million, j o will mean a saving of £7500 a year. A few days .ago we were informed by cablegram that the State of .Victoria had underwritten a loan at 4-}- per cent, at 99 for 41 millions. At the time this was announced, I expressed the opinion that the rate of interest quoted was a mistake and that it was probably .51 per cent. I understand that the Government has been advised to-day that that is the rate that has been, paid for the loan in question. .It will be remembered that, within the last week or two, the City of Sydney placed a 6 per cent, loan on the London market at £96. This was subscribed sevenfold. That rate is in marked contrast with the one now paid by the State of Victoria.

In reply to a question as to we position of the money market in New Zealand, Mr Beauchamp said: “I think that lenders in this country are employing most of their funds in taking up 44 per cent. Government bonds free of income tax. Exactly the same position prevails in the United States of America. I recently read an able article entitled “Clipital on Strike,” which showed that, through' the excessive taxation now imposed in that country, lenders are doing precisely as they are doing here, namely investing in what they call “Exenipts”— that is bonds or debentures free of income tax. The reason for this is quite obvious and, whilst there are many people,here eager to buy these bonds at the present rate, it is unlikely that they would be prepared to lend on mortgage for a term of j-ears at a percentage lower than the rate now ruling 7 per cent, per annum and not much money is available for mortgages even -at that high figure.—Special.