AMERICAN FINANCE.

Hawera Star, Volume XLVII, 11 August 1928, Page 8

AMERICAN FINANCE.

THE AUSTRALIAN LOAN. COMMENT ON LONDON REPORTS. (United Press Association—By Electric Telegraph Copyright.) (Australian Press Association.) NEW YORK. Aug. S. Reports from Lbridbn during June and -again in July that probably £250,000 of the Common wealth 4J- iper cent-, loan floated in New York in May was being sold 1 in London at, anywhere around £B9 and tluit the funds Were being used to purchase the isame flotation in New York at £B4 or a 'little higher, have caused considerable .interest here, but well-fiiforniecl men in Wall Street have found' it difficult to explain, and have even expressed scepticism that this was fib. When ishown the Australian couument that f‘the Commonwealth credit was being hawked about” these experts declared this was ah unmerited slur upon the- American method- of handling foreign bond flotations. They declare the situation is extremely complex and involves matters of foreign exchange which are not yet el ear'v understood by bankers. It iis pointed out that when the intense money stringency struck the New York financial market early in June, bringing the call rate to 10 per cient., it. had imtbhaillv a. depressing effect on the bond- market, making rt- dull and •irregular; and earned virtually all issues" down. It is interesting to- note that domestic bo rid w suffered more than idle foreign. Australian issues, including the 4.} per cent., felt the effects of stringency. but the latter never win it below £B6 15si -and never readied £B4 as reported from London. The sterling exchange. however, reached, as high nis 4.88. and it js posrib'e that -shrewd' speculators keeping a dose watch, on both the. T.ondon and Mm New York markets saw tine posis-i----hi'.itv of ouick turnovers by taking -advantage- of the sterling premtum and the depressed price of the 44 Trier cent, in New York, but this could not hove lasted long, particularly since sterling - une 4.85 and the 44 per cents, in New A T o-rk quickly recovered to £BB 5,5. It ,i« declared that it was Relieved that Australia always recognised the differences between New York and London methods. New York is a. frankly open market. A flotation made here to-diav may to-morrow find its way in or-reate-r part into the European markets. notably Amsterdam and London. Bankers frn.iiklv admit that this-is the se. ji ri d the, technical position is such th-it they cannot prevent it. Experts however, -are ,inclined to aric -mestions n.s to the Australian position relative to the 41- per cents'. They insist that these bond* are good, are recognised as sucb bore, and will continue to rise ns soon ns the incnpy stringency ends, the date of which, however, they nine- not prepared to -set. They ask. nevertheless. why the Commonwealth sinking fund cannot he utilised to purchase these -bends here whenever the discount on the .price would make the transaction profitable. Thev point out that the bankers- in certain flotations undertake to Supportthe price of the bonds they niuHerwrite bv buying in the open market un to 10 per cent, of the flotation if the rec-urities drop below m certain figure. Tt is beimr- asked whether in till© ease of the 4 X nor cent, the Commonwealth had made "any such arrangement.