Thames Star WEDNESDAY, APRIL 3, 1935. INTEREST RATES.

Thames Star, Volume LXV, Issue 19374, 3 April 1935, Page 2

Thames Star

WEDNESDAY, APRIL 3, 1935. INTEREST RATES.

"With malice towards none; with charity for all; with firmness in the right, as God gives us to see the right."—Lincoln.

Interest rates have fallen rapidly, partly owing to the supply of capital being in excess of demand and partly, in this country, owing to compulsory reductions in the interest payable on Government loans and mortgages. Some people expect rates to go lower still, while others predict a rise in the not distant future. The only method of discovering the true position is to make a comparison of the interest payable on various classes of security during the last year or two, but these are not available in this country and would not be a true indication of the position, since some rates are pegged and investors are shy about handling securities connected with the land owing to the uncertainty of the results of the recent legislation on mortgages, and the possibility of levies or quotas being placed on our exports. In Britain conditions are more stable and figures recently quoted by the "Economist" give a good idea of the general trend. This is of value to us as giving an indication of the cost of borrowing or converting our loans in London, and also because when our conditions become more normal our interest rates in this country will follow those in Brrtian, though possibly not so exactly as when money could be moved from this Dominion with little or no loss on exchange. In Britain the cheap money regime continued throughout the year 1934, but though there were numerous conversions the actual fall in the price of new capital seems to be coming to a halt. The yield on new industrial debentures continued to fall, but that on Government securities, both long and short term, rose fractionally. Government issues never went as low as at the close of last century when 2£ per cent. Consols were selling at £ll3. This was, however, probably due rather to the scarcity of trust securities in those days than to the lowness of the market rate of interest. The average yield on all new Government loans was 3.14 per cent, in 1934, exactly the same as in 1933, compared with 4.60 per cent, in 1932 and 4.77 per cent, in 1913. The figures are not strictly comparable, because the British Government did not borrow in 1913, but both Dominion and foreign Governments were borrowing in recent years and whereas they borrowed at an average -rate of 4.15 per cent, in 1913 and 4.03 per cent, in 1933, they borrowed at 3.39 per cent, in 1934. Municipal loans have continued to fall until they bring little more than Government loans, if the boroughs are of good standing. Compared with 4.74 per cent, in 1932 and 3.60 pe* cent, in 1933, the rate on new municipal and board loans in 1934 was 329 per cent. Turning to industrial securities the rate on new debentures, which was 5.44 per cent, in 1932 fell in 1933 to 4.58 per cent, and in 1934 to 4.48 per cent. Tho figures for new preference shares were 6.32, 5.28 and 5.00 per cent. It is evident that though the rates reached by Government stock seem to have touched the lowest point, British industries are still taking advantage of the fall in interest rates to reduce the fixed charges they have to pay for both new and old capital. On the whole it appears that interest rates in Britain have reached about their lowest point and are more likely to rise than to fall further.