NEW ZEALAND LOAN

New Zealand Times, Volume XLIX, Issue 11248, 28 June 1922, Page 7

NEW ZEALAND LOAN

NEW FINANCIAL RECORD. The “Times,” discussing the English 5 per cent, loan now standing at about 99, nearly 1 per cent, below the New Zealand 5 per cents., says : —“This means the establishment of a new financial ’record,’ as never in history has the yield from British Government securities been above that of colonial stocks. The War Loan is not only strangely low by comparison with Colonial Government stodke, but also by comparison with other British Government securities. At present prices, while 5 per cent. War Loan returns in interest alone £5 Is per cent., funding, conversion and 'local loans stocks have risen to levels that show yields of only 44 per cent. Lately some large blocks of War Loan have come on the market, the fact that the Government has power to redeem the stock in 1929 inducing holders to sell and exchange into long-dated securities. Having regard to the scarcity of all shortdated securities available, and the fact that national war bonds, with one exception (the 1929 bonds), stand at prices abovo their recemption value, it is surprising. that the War Loan should be allowed to remain- at its present level.” Another financial editor remarks.“Now that New Zealand has succeeded in its old attempt to create ;t fresh record in borrowing rates, investors are wondering what to expect next. For an overseas Dominion to he able to borrow .£5,00(1,000 at 5 per cent., offer its stock at par. and also redeem it at par, is no mean achievement. It is true that the New Zealand Government lias the option to redeem the issue on or after July Ist, 1935, and if money rates fall (and there are indications that they may) stockholders must not be surprised if the Dominion exercise, the option. Of course, it. may be that much of the secret of the success of such an issue at so row a rate of interest is on account of the fact that it is a sound trustee investment. It is now very difficult to obtain good trustee securities at a price on a par with or below the redeemable price. For trustees are personally liable for the £5 loss, say. in purchasing .£IOO at 5 per cent, stork at. .£lO5, which is redeemable nt £IOO, unless they take pains to provide a sinking fund out of the annual interest income. And this is an irksome job which few trustees care to face.”