16 FEBRUARY 1940, Page 34



IT is now apparent that the Treasury has taken the first hurdle in its open-market borrowing programme in good style. Conversion applications of £236,000,000 out of £350p00p00 of 4-f per cent. stock outstanding may fall a little short of the more optimistic estimates, but when properly appraised they must seem satisfactory enough. Those who had suggested a conversion total of L300,000,000 were obviously under the impression that a very large slice of the maturing stock was already held by the Government and that a further large amount was in the hands of money market houses. Automatic conversion of these two blocks, so the argument ran, must result in only a very small fraction of dissents.

The argument itself is sound—stock held by most of the Public Departments and the money market has been assented —but the premiss is false. In actual fact a much larger amount of Conversion 41- per cent. stock than has generally been supposed was held by the ordinary investor. To him the new 2 per cent. short-dated stock has not appeared a suitable investment, and accordingly those who did not sell in order to re-invest after the Government's plan was launched have asked for repayment. How much of this £99,000,000 will actually have to be found on July 1st it is hard to gauge, but my own guess is that the repayment problem will prove quite simple. A large part of the dis- sented stock will have passed into the hands of the bill market and many private investors will be willing to re- invest in Government securities.

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