TWO PER CENT. BONDS.

Otago Daily Times, Issue 21774, 13 October 1932, Page 8

TWO PER CENT. BONDS.

It might possibly be claimed that the successful conversion of the British 5 per cent. Avar loan to 3 A per cent, last August was achieved as much through the patriotism as through the financial prescience of the investors who rushed to accept a lower rate of interest. No such qualifying, statement can-be made with regard to the eagerness with which applications have been made for the issue of £150,00Q,000 2 per. cent. Treasury bonds, particulars of which are furnished in our cable messages this morning. The bonds are offered primarily as a conversion issue for £140,000,000 of 4A per cent. .Trea-

sury bonds which are to be redeemed in December, Not only, however, have the holders of the maturing 4i per cent, issue shown a keen desire to convert, but the public has apparently been positively scrambling for the portion of the loan made available to it. The readiness of investors to maintain their holdings in gilt-edged securities at a low return, and to buy in for cash on the new rate, which is said to be the lowest offered on a Government security within the memory of the City, provides unanswerable proof of the cheapness of money at the present time. Moreover, in the opinion of those who are qualified to offer an opinion, it is likely to remain cheap for a long time to come. It was in 1888, it may be recalled, that the “ Goschens ” were created through the conversion of the National Debt at the then unprecedented price of 2i per cent. Patriotism may to some extent have dictated the previous war loan conversion operar tion, but it could scarcely be maintained that British investors are now buying gilt-edged securities at 2 per cent, simply to -help the Exchequer. It has been realised in Great Britain, much sooner than in other equallyburdened countries, .that the lowering of'interest rates is a concomitant of the financial reductions in mostt commercial and industrial enterprises and, like them, is necessary for the. purpose of stabilising values. At the time of the successful war loam conversion the Economist commented: “The voluntary acceptance of substantial income sacrifice . . . may . well be the

beginning of a world-wide recognition that a general lowering Of interest rates, connoting an important alleviation of the burden of fixed charges, is an essential part of the financial and economic evolution necessary to recreate the conditions of returning prosperity \ n The new Treasury operation provides the evidence that this trend in Great Britain at least is now assured, and it may be that other countries will find the acceptance-of it inevitable and beneficial.