THE BOND MARKET 
25Q 
However, it is a complete fallacy to think that bonds are 
not the objects of speculation, or that they are immune from 
speculative forces. Whenever the payment of interest or prin- 
cipal on a bond issue becomes really doubtful, speculative 
factors enter its market, and trading in it tends to increase. 
Similarly, a sudden change in short-term money rates, by 
creating a greater disparity between themselves and prevailing 
bond yields, may impart speculative price changes to the bond 
market. Also, when a very large bond issue is floated, its dis- 
tribution, which may for the time being tax the resources of 
the market, may temporarily entail active trading and specu- 
lation. Moreover, when bonds are in the denomination of a 
foreign currency and marketed in America, any real disturbance 
in its foreign exchange rate with dollars may render such bonds 
active and speculative on the market. Convertible bonds may 
through their conversion privilege prove as speculative and 
active as the shares into which they are convertible. Finally, 
as economists have frequently pointed out and as many con- 
servative investors of pre-war Europe have learned to their 
cost, bonds by virtue of being a definite money contract may be 
profoundly depreciated in actual value by currency inflation or 
rising commodity prices, since in such cases the actual buying 
power of the money which they involve will be considerably 
diminished. We must not, therefore, consider that speculation 
is absent from or unnecessary in the bond market, but only that 
it is not present there as extensively as in the stock market. 
The New York Bond Market—The New York bond 
market consists in reality of three different parts; these some- 
times overlap and deal in the same bond issues, and sometimes 
maintain a distinct and exclusive character. The first section 
of the market exists between the underwriting and issuing 
houses and the investing public direct: its chief vehicle is the 
printed advertisements of new “offerings,” and in any given 
bond issue it dominates distribution as a rule only during the