1 MARCH 1930, Page 53

A New Government Loan - Although Mr. Snowden has only

been in office for a little more than six months,, we have now seen two Government Loans issued under his Chancellorship. The first was in November of last year, when, it will be remembered, a 5 per cent. Conversion Loan was issued, invitations being. given both for cash applications and for the conversion of 5/ per cent. Treasury Bonds expiring in May. It also carried certain conversion rights in the matter of the 5 per cent. War Loan and the issue was a decided success. Out of Treasury -Bonds maturing in May to the extent of about £185,000,000, something like £79,000,000 was sent in for conversion while cash applications amounted to £154,000,000. It will be seen, therefore, that the Chancellor received enough in the way of cash _subscriptions to repay £80,000,000 in Exchequer Bonds which matured in January of this year, and—allowing for the £79,000,000 converted—to repay the whole of the Treasury Bonds maturing in May, leaving himself with a small amount over for redeeming outstanding floating debt in _ the shape of Treasury Bills and Ways and Means Advances.


In some quarters, therefore, surprise was occasioned when it was announced at the beginning of this week that a further offer was being made of the existing 4+ per cent. Conversion Loan, the offer being made once again for cash applications and also for those still holding the maturing Treasury Bonds in - May- amounting to £56,000,000. Where, it was asked in some quartersThas the large amount in cash subscribed for the issue in last November gone to that more money should be wanted to deal with the May maturities ? The answer, of course, is not far to seek. Last November when the large cash applications were received, the Floating Debt was £95,000,000 greater than at the same date in the previous year ; to-day there has been a great reduction. In other words, Mr. Snowden has used his cash sub- scriptioris of last November to aid the reduction in the Floating Debt. It is quite a praiseworthy policy, but it must not be pursued too far or the raising of too much money from the public at the time when the taxes are going in may tend unduly to deplete resources required for the financing- of industry. -


As to the new Loan itself and its maturities from the investor's point of view, the position can be described in a sentence. The Loan runs for a maximum period of fourteen years and for a minimum period of ten years. The Loan is in 4+ per cent. form and, the issue price being 95, what is called the running yield—that is with no allowance being made for redemption—is just under 41 per cent. If the Loan should run for the full fourteen years, redemption at par means that the holder will receive nearly £5 ls.; while if it should be redeeined in 1940; the yield would work out to something like £5 3s. Before this article appears in print the lists for cash subscriptions will have closed, but at the moment of writing the opinion in the market is that the spare funds available for investment are not sufficiently large at the moment to make it likely that there will be any rush