AUSTRALIAN LOAN

New Zealand Herald, Volume LXXIII, Issue 22320, 18 January 1936, Page 14

AUSTRALIAN LOAN

LONDON CONVERSION ONLY HALF SUBSCRIBED UNDERWRITERS TAKE REST INTEREST HARDENING By Telegraph—Press Association—Conyright (Received January 17., 5.5 p.m.) LONDON. Jan. 16 It is understood that the under'writers took up 50 per cent of the Australian £21,657,000 conversion loan. Dealings started at 15s discount and, closed at 23s 9d discount. The result depressed the gilt-edged Etock market. A possible explanation is that most of the old New South Wales 5 per cent loan is held on the money market, which found the new longdated stock unsuitable to its needs. Consequently conversions were unsatisfactory, but the underwriters are not disturbed. In contrast to the Australian conversion operation is a Siamese 4 per cent conversion for which cash applications ■were closed in 3o minutes, the loan being heavily over-subscribed. The City editor of the Times says the less enthusiastic reception of the Australian loan docs not reflect the Commonwealth's credit or economic position. f lt is merely due to the changed investment conditions. It would be unreasonable, to expect the rate of interest- on fixed interest stocks to continue falling indefinitely. The yield steadily declined from the beginning of 1932 to 1935, therefore it is not surprising that investors are not interested in a security of which they could purchase the equal in Australia to yield nearly £ per cent more. The Daily Telegraph's financial correspondent says the over-subscription of the Siamese loan is overshadowed by the poor results of the Australian issue, and the underwriters are faced with a temporary period of indigestion. Circumstances do not appear to favour the early appearance of another large trustee issue.

The Australian issue is for the conversion of £21,657,000 of New South Wales 5 per cent stock to 3 per cent stock at 951, which will mature in 1955-58. The issue price will yield the investor' £3 6s per cent, including redemption. The last previous conversion was to 3 per cent stock at par, but, as a setoff to the slightly cheaper rate then obtained, the period of the new loan was much shorter —193941. The conversion now effected will bring a saving of £526,000 in Australian currency. The aggregate saving by conversions between October, 1932, and July 1935—the date of the last previous issue—was authoritatively stated to have been £3,116,000 in Australian currency, a measure of relief from the weight of debt charges which must have been of very high value to the Commonwealth. The dates of all the Australian conversion operations in London, from the first in October, 1932, to that just completed, together with the amounts involved, and the rates of interest on ■the new stock, are as follows: —

Date Amount ! Interest p.c. Oct. 3, 1932 .. £12,360,959 3Va Feb. 24. 1933 .. 9,621,843 4 May 30, 1933 .. 11,409,965 3% July 15, 1933 .. 17,221,191 4 Sept.'14,1933 .. 20,951.226 3% Dec. 6, 1933 .. 16,647,349 3% Feb. 21, 1934 .. 21,636,550 3% Nov. 8, 1934 .. 14,601,806 3% Jan. 17, 1935 .. 22,384,000 3'A D uly 24, 1935 .. 13,469,981 3 Jan. 16, 1936 .. 21,657,000 3 Total .. .. £181,961,873