London Money Market

Hokitika Guardian, 22 February 1922, Page 4

London Money Market

... BOOM. IN GILT-EDGED SECURITIES

veaSBAMAS AND N.Z. OABI.B ASSOUATION. LONDON, Feb. 18. The past week has been one of extraordinary activity in the “giltedged” department of the Stock Exchange. The upward movement began when the Government announced a suspen-' sion of the issue of 5 per cent. Treasury bonds. This was regarded as indicating a reduction in the bank rate, and when the reduction was made it was an even more potent influence. Bankers immediately reduced their deposit rates to 2-f per cent, and, with the knowledge that enormous sums of money were still unemployed in tr^ 1 - buyers soon came along for all Government securities.

Yesterday the movement in a. degree of activity quite unprecedented in the country’s markets. Prices rose by leaps and hounds. Dealers were surrounded by -brokers clamouring to buy. The turnover was enormous, and exceeded anything within memory. The scene in the usually staid consols market was reminiscent of the rubber market in boom times. Consols, local .loans, and war loans were-.in the greatest demand, hut colonial loans participated fully, and there was brisk busi-iie.-s in many foreign stocks, by investors seeking a higher yield than then own -Government's stocks r< turn.

It is reported that a Government broker was buying, which revived the id a that the present rise in gilt-edged securities is part of a ,big movement lo raise prices to such a level, as to permi■ of the ,flotation qf a big funding suliqmie on .favourable terms. \lt is

noteworthy that all -.Government Issues

made during the war period now stand at -the issue prices, or at substantial premiums, an exception being the war .' \ per cent loan issued at 100. Tbe I'oco.vary in most of these stocks is extraordinary. .Compared with their prices on Jlccember 31st, 1920, consols nr.; .11 points higher, .per cent war loan stocks 9 points higher, IL.per cent war lean storks 12J- points, o per coni, v.qir .1. an 131 points, the Funding Loan 12;; points, and .Victory bauefs 13;1 points higher. Tl ic great strength ,c.f gift-edged securities lias had a favourable .effect- on Ike industrial share market, which has become .quite die. rful. Although there is no appreciable expansion of Iqisiness it is noticeable that prices generally have developed favourably. There was an all-rouml improvement in hank shares, and the good recent demands for first-class industrial debentures have become even stronger.

NEW ZEALAND’S OPPORTUNITY WELLINGTON, Feb. 20.

It is evident from the cabled description of lively movements in gilt-edged stocks that money is cheap and plentiful in London. Local financial authorities regard the opportunity as an excellent one for the New Zealand Government. It was Mr Massey’s intention not to raise any portion of the latest loan authorisation of five millions until the end of this financial tear, but present developments may hasten the process. It is believed here 'ha; the English activity in Government securities shows that owing to excessive taxation and other restraints on trade expansion, funds are being diverted from industries into investments in Government securities of every description. It was stated as an axiom that when trade is stagnant money is cheap. When trade is brisk, then monfey is made dear in order to act as a brake. This was expressive of some of the opinion gathered oil the point of the feverish demand for Government securities.

One feature of the present state of the London money market has an important bearing upon New Zealand’s present financial position. The Do minion is generally understood to be in gikmt need of ready money lor Government and local body purposes. Now is its chance. 'Joie market is more favourable to borrowers than it lias been for a long time past. If the Government ventures in with a big loan for distribution among local bodies, 'especially for the speedy development of hydro-electrie enterprises, it could hardly do so at a better time than now. Local body individual loans with Government guarantee should also have a good chance of success in London.