AUSTRALIAN CONVERSION

New Zealand Herald, Volume LXX, Issue 21505, 31 May 1933, Page 10

AUSTRALIAN CONVERSION

The terms of the Australian conversion loan to he launched in London to-morrow show that a bold bid is to bo made to share the cheap credit the British Government has been enjoying for some time past. The issue is for a five-year term at 3\ per cent at £99. The yield, including redemption, will be £3 lis sd, a level Mr. Lyons says should be satisfactory to investors. Last week's issue of British 2| per cen't conversion loan was allotted to tenderers offering from £92 upwards. The yield at £92 with redemption, for the full 16 year term of the loan is £3 3s 6d, which is the highest price the Treasury had to pay for the block of £7,719,000. Australia, therefore, hopes to come within from h to f per cent of the rate at which Britain is borrowing, the shorter term of the issue helping to make it more attractive to investors. AVhen applicatjpn was made to the market in October for £13,000,000 to meet a maturing New South Wales loan, the issue price was £97 10s for five year stock at 3?r. The cost, including redemption, was £4 Is 2d. Mr. Bruce had hoped for 4 per cent, but in the beginning the market indicated that Australian credit was no lower than per cent. At the intermediate figure, £4 Is 2d, the issue was an instantaneous success. A few weeks later, as has been recalled in the last day or two, an issue in Australia at 3f per cent at par had a lukewarm reception from the Australian public. Now a similar issue has been substantially over-sub-scribed. This can be taken as a happy augury for the London operation. The situation has changed remarkably since August, 1930, when Sir Otto Niemeyer, addressing the Premiers' Conference, said: "Australian credit is at a low ebb, on a 6 per cent basis in Australia itself and rather more abroad." Having proved that it is on a 3| per cent basis in Australia, the Government is now proceeding on the assumption that it is slightly less abroad. It is a bold stroke, with a saving of £396,000 a year in prospect and the fate of further substantial conversions concerned in this incursion into the London market.