Market Notes
By CUSTOS
THE issue of a new short 'tap' stock—f700 million 61 per cent Exchequer 1971 at 991— put a damper on the 'short' end of the gilt-edged market. The market in the 'long' end is still `bullish' and money is pouring into the existing long `tap'—Funding 6 per cent 1993—which has moved up from 84f to the present price of 851 to yield 7f per cent to gross redemption. The expectation is that the 'tap' will soon dry up. So far the long-term rate of interest has fallen by about f per cent and if the present bullishness can be maintained it might even fall by another
per cent before next April. Equity shares remain depressed by Wall Street and by the poor outlook for earnings and dividends. Even when earnings are rising dividends must remain frozen for the next twelve months as Sir Isaac Wolfson has found out to his great disgust. GUS had already paid two interim dividends-17f per cent and 74 per cent—and on July 6 the board promised a final dividend of 114 per cent, bringing the total up to 364 per cent. But the Treasury have disallowed it and a final dividend of 74 per cent only is to be paid making the return unchanged at 31f per cent. As the market has been dealing in GUS on the basis of 361 per cent it was con- sidered a breach of faith. But what does that matter in the present financial climate? The shares fell temporarily by 6d. to 40s. 1014. to yield 3.9 per cent, but are recovering. The in- vestor is, of course, well advised to buy shares like GUS, which are stopped from increasing dividends, rather than shares which are putting off an inevitable cut in dividends.
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