PAST OPERATION

Otago Daily Times, Issue 23810, 17 May 1939, Page 10

PAST OPERATION

INTEREST RATES RISE TRENDS IN AUSTRALIA The last loan operation conducted by the Government on the internal market was the issue of £ 13,930,000 in October, 1936. This loan was issued at 3 per cent, and 3J per cent, at par for the purpose of the redemption of an existing 4 per cent, loan amounting to £12,426,675 and also for the redemption of securities amounting to £1,530,000 issued in respect of the repayment in London of the Southland Electric Power Board 5 per cent, and 6 per cent, guaranteed debentures. While the U per cent, long-term rate (1953-57) was accepted the low short-term rate of 3 Der cent. (193941) was much less popular. The loan was under-subscribed by £2,900,000, but no indication was given at the time of the amounts applied for in the 3 oer cent, or the 3i per cent, issues, which were at the choice of applicants. Since then there has been a definite hardening of interest rates both in the Dominion and in Australia. The present average yield of Commonwealth loans is £3 18s 9d per cent. Four per cent, loans are giving a yield of Zl per cent, and loans issued at 31 per cent, are showing around 4 per cent. The last Commonwealth works loan of £8,500,000 in February carried 31 per cent, and the average yield on 4 per cent Commonwealth loans at that time was £3 15s 5d per cent. That loan was under-subscribed by £3,700,000, it being understood the Commonwealth Bank took up £2,000,000 of the deficiency, and the trading banks and financial institutions the remainder. Preparations are now being made for a further Commonwealth loan in June, amounting possibly to about £7,500,000, and Australian observers report that there has been evidence that the authorities have been supporting the market in recent weeks in order to justify an offer of 31 per cent, for the coming issue.