Tighter Money

After one more downward swoop that carried the latest Treasury issue nearly two points below par, the Government bond market leveled off last week for the first time since the decline began early last month (TIME, March 22). Widely regarded as marking the end of the long bull market in bonds and the start of an inflationary stage in Recovery, the drop in Governments was followed by the shelving of half a dozen corporate bond offerings and a general tightening of sensitive short-term money rates. By any normal standard money was still ridiculously cheap but the up trend was unmistakable.

On an offering of nine-month discount bills last week the Treasury had to pay about 0.7% interest, as against about 0.5% only the week before. In 1935 the Treasury borrowed money for as little as 0.06%.

Commercial paper was boosted from f of i% to a flat 1%--first change since April 1934. Bankers' acceptances were hiked not once but twice, bringing the rate to its highest point in three years and slightly above the figure offered by the Federal Reserve Banks ( 1/2of 1%). However, the Federal Reserve not only refused to up its acceptance buying rate to the open market level but actually bought some bankers' 1/2 bills, for the first time in more than two years, thus flashing its clear distaste for the strength of the money market. When it increased bank reserve requirements last January, the Federal Reserve expected short-term interest rates to firm a little, its chief interest being long-term rates, which it wants to keep low. So far both types of money have tended to harden together.

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