LOWER PRICE OF BONDS.

New Zealand Herald, Volume LXVIII, Issue 20968, 3 September 1931, Page 11

LOWER PRICE OF BONDS.

REASON FOR 'SUDDEN DROP

BLOCKS FROM AUSTRALIA

CONTRADICTION OF RUMOURS

[Bt TELEGRAPH. —OWN CORRESPONDENT.] DUNF.DIN, Wednesday.

" Members of the Stock Exchange and the investing public will no doubt be considerably perturbed at the sudden drop in the price of New Zealand Government securities," said the chairman, Mr. Barman Reeves, at the meeting of the Dunedin Stock Exchange this morning. "For the information of frhose not in a position to know, 1 might explain that a cause of t"his fall is the large blocks of New Zealand Government 5j per cent. 1933, 5j per cent. 1937 and 1951 bonds and stocks, and, in soma cases, 4£ per cent, tax-free bonds that are being offered from Australia at very much lower prices than those recently offered on this market. " The setting up of a Special Committee by Parliament to go into the finances of the Dominion has caused an uneasy feeling among holders of these stocks in Australia, and they are seizing the opportunity of the existing high rates of exchange ■ to dispose of their holdings in New Zealand. Australian holders can offer to take £95 for their stock in New Zealand and yet receive in Australia over £ll3, the reason being, of course, that the exchange at £lB 12s 6d is in their favour.

" Toward the end of July it was announced by the Minister of Finance that the loans then being offered for public subscription at 5£ per cent, with currency to 1937 would close on July 31, and after that date no higher rate of interest than 5 per cent, would be offered. As a result, large sums of money were obtained by the Government from all over the Dominion and applications were made by large and small investors. A few days after the closing of this loan these securities were selling as high as £IOO 10s on the market.. Later, the Special Committee was set up by Parliament to consider the finances of the Dominion and advise the Government. Rumours immediately began to circulate that there was a possibility of the Government reducing the rate of interest as had been done in Australia. "I would ask members to take no notice whatever of these and to refute them whenever possible," continued Mr. Reeves. The reputation of New Zealand stands too high for the Government, of the country to interfere with or try to cancel contracts already entered into in regard to rates of interest. This would amount to repudiation and the good name of New Zealand would be gone for ever in both Australian and London financial circles. Our position is entirely different, from that of Australia. Our Government stocks until recently remained high, around par. Australian stocks had fallen so low in Australia and London, and the. market was so unstable that holders welcomed the. scheme for conversion at reduced rates. It stabilised the market, and holders "ill now know the value of their securities. Previously they did not know from day to day what they were worth."