Manawatu Evening Standard. SATURDAY, JUNE 10, 1939. THE AUSTRALIAN LOAN.

Manawatu Standard, Volume LIX, Issue 162, 10 June 1939, Page 8

Manawatu Evening Standard. SATURDAY, JUNE 10, 1939. THE AUSTRALIAN LOAN.

Thk Hi ini loan to be placed on (lie London market within the past fortnight has met with a most disappointing response. The first was South Africa’s issue of ±•5,000,000, for which more than ±63,000,000 was offered. This resulted in all applications under ±6OO being eliminated, while for the remainder only eight per cent, of their requirements could be met. Dealings in the loan immediately carried the price to a premium of 29s 3d. This change of sentiment, it was recorded at the time, hail a remarkable influence upon gilt-edged securities and under its stimulus the market gathered much strength. South Africa is at present, for wellknown reasons, enjoying a period of splendid prosperity. The loan no doubt is to further the defence programme of ±6,000,000 to be spent in three years. Coastal defences at Port Elizabeth and East London are to be strengthened, as well as those at Capetown and Durban. The citizen forces are being brought to a high level and generally placed on a footing which will ensure an adequate land army. South Africa was generally well situated to place this loan on the market. The second loan was floated by the Government of Northern Ireland, and within an hour of its opening the full amount of ±2,500,000 at 3$ per cent, was fully subscribed. Australia then tested the market with an issue of ±6.000,000 in 4 per cent, registered bonds to meet defence expenditure in the United Kingdom. It was not given an encouraging reception, authorities holding the view that the Commonwealth had not given time for the other loans to be fully digested. Two previous Australian issues were comparative failures. These were at 3j and 4 per cent., two-thirds falling back into the hands of the underwriters. The new issue was on more favourable terms, the return working out at ±4 2s per cent., which the Financial News regarded as “generous, even over-gener-ous in the eyes of Australians.’’ The reception it received more than bore out the forecasts, for the underwriters are expected to be left with 80 per, cent, as against an anticipated 50 per cent.

The reception of the'loan is of particular interest to this Dominion. The Minister of Finance’s

v 'isil to London has important reference io the loan of £17,000,000 Jailing due at the end of the year. One of his duties is (o complete the arrangements for its renewal, but it must be borne in mind that it is not new money, and that therefore the failure of the Commonwealth issue does not fully, apply. Nevertheless, as the Manchester Guardian’s writer points out, the result will be an “indication to New Zealand of what terms she may expect in this conversion.” There is another important factor in New Zealand’s case, and that is the success of the internal loan floated recently. The City of London must be impressed by tlrt* manner in which it was received. It seems very likely, too, that this country will have to pay more in interest as the market is hardening. In this respect the result of the Australian issue must also be a keen disappointment to the Government of this Dominion, which wishes to see interest rates kept as low as possible, though it has recognised in its recent internal loan that, market conditions must be met. The Commonwealth appears to have erred very badly in testing the market so quickly alter ihe South African and Northern Ireland loans.