BOLD FINANCING

Wanganui Chronicle, Volume 79, Issue 284, 4 December 1935, Page 7

BOLD FINANCING

NEW BRITISH ISSUES CONVERSION OPERATIONS STABILISATION OF LOW INTEREST RATE TREASURY MAKES HISTORY [ British Official Wireless. ] Received LDec. 3, 7.45 p.m. RUGBY, Dec. 2. Two new Government issues have been announced. The first is a shortterm bond redeemable on February I, 1941, or any time after, February J, 1939 at the option of the Treasury after 3 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 £1 8s 5d per cent. The total amount of this issue, W'hich will, of course, appeal chiefly to the money market, is £lOO,000,000. The second issue is a medium longterm loan of £200,000,000 in the form of a ‘-it per cent, funding loan, 1956 61. The issue price is £96 10s and the yield, allowing for redemption at the latest date, is £2 13s lOd per cent. For the latter loan there will be a separate issue on the Post Office register available for small investors, who will apply through such banks as the Post Office Savings Banks and the Trustee Savings Banks.. In a special issue of the Londor Gazette to-night, the Treasury give notice that in exercise of their option under the prospectus, they will repay at par on March 2, next the whole of the £150,000,000 of the issue of 2 per cent, bonds 1935-38, made in October 1932. The present cheapness of money and 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 instalments dates of the new loan indicate that the money will be [applied as to £15,900,000 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, 1932, of 3 per cent. Treasury bonds, which will be repaid on April 15, 1936. There will remain £98,000,000 in cash available for reduction of the floating debt, which has been increased during the last year by the redemption of April 15 last of £44,000,090 of the same issue of 3 per cent, bonds. The funding of the floating debt in a

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 of, say, J2s 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 interest on £54,000,000 of Treasury bills will, in effect, have been stabilised for the next 25 years at 12s 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 2j per cent. A NEW MILESTONE BRITISH FINANCIAL PROGRESS COMMENT BY THE PRESS. Received Dec. 3, 10.5 p.in. LONDON, Dec. 2. “A new milestone in British financial progress,” is the Daily Mail’s description of the conversion. It says: “The boldness in dealings with the national finances in this comprehensive fashion, shows that the Treasury still has a sound grip on the situation. Its cheap money policy is being carried out with skill and foresight.” The Daily Telegraph notes that the loans have been announced during a fateful week when the prospect of further sanctions against Italy has cast a faint but perceptible gloom over the financial horizon. The Government, by advertising the 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 giltedged markets, which will interpret the issue to mean that the Government is of opinion that there is no need to defer such a domestic operation owing to the cloudy international outlook.”