"NEW FINANCIAL MILESTONE”

Timaru Herald, Volume CXL, Issue 20282, 4 December 1935, Page 9

"NEW FINANCIAL MILESTONE”

BRITAIN’S STABLE FINANCE CONVERSION OF LARGE LOAN ISSUES BEST DEAL IN COUNTRY’S HISTORY British Official Wireless (Received December 3, 5.5 p.m.) RUGBY, December 2. Two new Government issues are announced. The first is a short term bond, redeemable on February 1, 1941, or any time after February 1, 1939, at the option of the Treasury after three months’ notice. This bond will bear interest at one per cent, and will be offered for subscription at £9B, showing an interest yield with redemption at the latest date of £l/8/5 per cent. The total amount of this issue, which will of course appeal chiefly to the money market, is £100,000,000. The second issue is a medium longterm loan of £200,000,000 in the form of a 21 per cent, funding loan, 1956-61. The issue price is £96/10/- and the yield, allowing for redemption at the latest date, is £2/13/10 per cent. For the latter loan there will be a separate issue on the Post Office register available for small investors who apply through such banks as the Post Office Savings Banks and the Trustee Savings Banks. TERMS OF REDEMPTION BORROWING AT LOWEST RATE IN HISTORY British Official Wireless (Received December 3, 5.5 p.m.) RUGBY, December 2. In a special issue of the London Gazette to-night, the Imperial Treasury gives notice that, in the exercise of their option under the prospectus, they will repay at par on March 2 next, the whole of £150,000,000 of the Issue of 2 per cent, bonds, 1935-38, made in October, 1932. The present cheapness of money, and the high credit enjoyed by the Government, thus enables the Treasury to redeem the whole of this issue, costing them no more than 2 per cent, in interest, two years before the prospectus obliges them to do so. The instalment dates of the new loan indicate that the money will be applied as to £150,000,000 to redeem the above-mentioned 2 per cent, bonds, and as to £44,000,000, to redeem the outstanding amount of the issue dated April 29, 1932, of 3 per cent. Treasury bonds, which will be repaid on April 15, 1936. There will remain £98,000,000 cash available for the reduction of the floating debt, which has been increased during the last year by the redemption on April 15 last, of £44,000,000 of the same issue of 3 per cent, bonds. The funding of the floating debt in time of cheap money is generally regarded as an act of prudence, but with the rate of interest on Treasury bills standing at the present exceptionally low level, say 12/- per cent, per annum, it cannot but result in some immediate increase of cost. The net result of the whole operation, after making allowance for this, is to leave the current cost of interest on the national debt approximately unchanged, but with the important advantage that the interest on £54,000,000 of Treasury bills will, in effect, have been stabilised for the next 25 years at 12/- per cent. It is interesting to note that this will be the first time in British financial history, that the Treasury has been able to borrow at the nominal rate of 1 per cent, in any form, except Treasury bills, and to borrow by means of a public issue for as long as 25 years at the nominal rate of 2S per cent. SOUND GRIP OF SITUATION STABILITY OF BRITISH FINANCES DEMONSTRATED INTERESTING PRESS COMMENT United Press Association—By Electric Telegraph—Copyright (Received December 3, 5.5 p.m.) LONDON, December 2. “A new milestone in British financial progress” is “The Daily Mail’s” description of the conversion transaction. The paper says that the boldness in dealing with the national finances in this comprehensive fashion, shows that the Treasury has still a sound grip of the situation. Its cheap money policy is being carried out with skill and foresight. “The Daily Telegraph” notes that the loans were announced in a fateful week, when the prospect of further sanctions against Italy cast a faint but perceptible gloom over the financial horizon. The Government, by advertising loans now, has manifested the view that a safer, and not more insecure world, is being moulded by its foreign policy. “The Times” says: “Fresh life will be put into the gilt-edged markets, which interpret the issue to mean that Government opinion is that there is no need to defer a domestic financing operation owing to a cloudy international outlook.”