Bind in Bonds

While the stock market scrambled to a new 1958 high for the third week in a row, the bond market was still in trouble. Part of it was due to continued speculative selling by free-riders in Government bonds (TIME, June 30). But a bigger cause was the fact that the corporate bond market was swamped with high-grade issues, was trying to peddle them at a time when investors were increasingly queasy over the Federal Reserve's next move on interest rates.

Wall Street glumly estimated a float of $100 million to $150 million worth of unsold high-grade bonds in dealers' hands, with another $500 million worth of new bonds scheduled for offering within the next three weeks. The market was so saturated that Standard Oil of California decided to withdraw a planned $150 million offering because the underwriters' suggested price was too high. A $20 million issue by Pacific Power & Light Co. was tough to sell even with a yield of 4.35%. Moreover, when two syndicates that had been supporting the AA-rated issues of Illinois Power Co. and Niagara Mohawk Power Corp. withdrew their support, the bonds immediately dropped a point or two, and still had trouble finding buyers. Halsey, Stuart & Co., with a $50 million Consolidated Edison issue, was also in trouble, but it extended its underwriting pact in hopes of getting out of its commitment at a better price in the next few weeks.

Everyone was waiting for some indication of the Federal Reserve's future money policy. Last week the direction was still toward easy money. The Federal Reserve's open market committee continued its buying of Government bonds, thus helping stabilize the market. Moreover, it announced that for the week ending June 25, average free reserves of member banks hit $611 million and the highest level in 3 1/2 years. To Wall Street it meant that there would still be plenty of money around for investment once the market settled down.

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