Short notes on Government Securities

The transactions of the English stock exchanges embrace national, colonial, and foreign securities, issued either by governments, town corporations, or joint-stock companies.

The National Government stock, in which the largest amount of English capital is invested, is represented by the Consolidated Annuities, commonly called Consols, the stock having originated from the blending to­gether of several separate funds previously existing.

The consolidation took place in 1751, but many other public loans have been funded into it since that time, so that the funded debt of England amounted, in 1889, to the enormous sum of 607,057,811 pounds, re­presented by certificates to bearer or registered, each for the amount of 50, 100, 500 or 1,000 pounds. The debt is, however, yearly reduced by means of termin­able annuities, which the Treasury is empowered by Parliament to issue.

Terminable annuities are annuities for a period of twenty years or thereabouts, which are given in exchange for permanent stock.

The holder of Government stock transfers it to the Treasury, and receives a certificate of Terminable Annuity, entitling him to double the interest repre­sented by his stock. The payment of double interest includes, of course, the payment of a part of the capital. The Treasury cancels the stock thus exchanged, and reduces the National Debt down to the sum fixed by Parliament.

Up to April 5th, 1889, Consols were yielding an interest of 3 per cent., and were known, therefore, as the Three per cent. Consolidated Annuities. By the National Debt Conversion Act, 1888, the interest was reduced to 2 3/4 per cent, (less income tax), to be 2 1\2 per cent, only after 1903; and the new funds were issued under the name of New Consols. They are, however, called and often quoted as Goschens, Mr. Goschen being the Chancellor of the Exchequer who effected the conversion

Other Government securities forming part of the unfunded debt are: the Two-and-three-quarters per cent., and the Two-and-a-half per cent., lately reduced, and others deriving their name from the rate of interest allowed on them, all formed at different epochs, either through the blending and reducing of old debts or the issue of new ones.

All these stocks are quoted on the market at so much for 100 pounds.

Exchequer bills, Exchequer bonds, and Treasury bills are temporary Government securities issued by the Lords Commissioners of Her Majesty’s Treasury to meet the exigencies of the State, and form the un­funded or floating debt of the United Kingdom, amounting now to nearly 17,000,000.

These securities differ from each other mainly in their term of issue, and the mode in which the interest due on them is fixed.

An Exchequer bill runs for an indefinite period of time-that is, it may be renewed when the coupons attached to it are exhausted; while, on the other hand, the holder has a right to claim payment for it at the end of each subsequent year from the date of issue.

The rate of interest on such securities is fixed every year, and varies, therefore, according to the more or less pressing necessities of the Treasury.

Unlike bills, Exchequer bonds are issued for a defi­nite period, which cannot exceed six years, and bear throughout the whole term the rate of interest fixed at the date of issue.

Treasury bills (created in 1877) are drawn either for three or six months and bear no regular interest, being, however, issued at a discount, which comes to the same thing, as the holder of each bill is paid back at maturity the whole of its nominal value.

The dis­count is not fixed by the Government, but offered by applicants whenever tenders are invited through an official advertisement in the London Gazette, the Treasury Department allotting the stock to the highest bidders.

Bank Stock.-

Next to the Government funds, and fully as popular, ranks the National Stock of the Bank of England, quoted as Bank stock, at so much for £100.

Any Bank stock certificate represents a portion of the capital employed in the banking department of the Bank, which is now calculated at £ 15,000,000 or there­abouts. The certificates have no fixed figure, but may be obtained, through the required formalities, for any amount of stock not involving fractions of a penny.

The rate of interest due to stockholders is declared annually, and varies according to the larger or smaller profits made by the Bank, a portion of which profits is from time to time added to the capital.

Colonial Stocks.-

Colonial stocks are represented by the loans created at different epochs by the several colonial governments of the British Empire, such as India, Canada, Australia, New Zealand, etc., the coupons of which are payable in London; some being also guaranteed by the Imperial Treasury.

Industrial and other Stocks.-

British capital being, like British activity, spread all over the world, a con­siderable part of stock business is taken up with the day purchase and sale of shares is almost every kind of industrial or commercial under taking both at home and abroad, the financial management of which is, however, carried on in London, such as :-

Railways and tramways, telegraphs and telephones, waterworks, gas and electric light, steam navigation, mining banking, insurance, etc.

The annuities issued by the municipalities of the largest cities of the realm, as well as by foreign governments, are also largely dealt in on the London Stock Exchange, whose daily price-list is probably the most important in the financial world.