There is very little appetite for Government securities, evident by the less than ideal take-up two months after a $125 million Treasury Notes issuance, the first major Government bond offered since the debt restructuring of 2018.
With the bitter taste of the 2018 debt restructuring still lingering in the mouths of holders of Government bonds who had to suffer major losses, Governor of the Central Bank of Barbados Cleviston Haynes reported that only about a quarter of the Treasury Notes has been taken up by individuals and financial institutions.
Responding to questions on Wednesday during his economic review and outlook, Haynes pointed out that in issuing the securities on behalf of the Government at the end of November last year, the Central Bank “recognised that the market may not yet be fully ready to get back into those investments”.
“We looked at who the institutional players are and were as to whether or not they would take up. So far, speaking subject to correction, we probably have had a take up of about 25 per cent or so of those bonds,” said Haynes.
“It has been low but it has a mixed take up from financial institutions and individuals for the first set that was taken up by the public,” he reported.
The $125 million Treasury Notes opened on Monday, November 22, 2021, and was aimed at raising funds to assist with the financing of the economic recovery from the COVID-19 pandemic.
The notes, which are available from $1,000 and up and attract an interest rate of 4.25 per cent, were issued on December 1, 2021 and will mature in 2026. Interest will be payable on February 28, May 31, August 31 and November 30 of each year.
Indicating that there has been interest from overseas in the debt issuance, Haynes gave the assurance that the Central Bank would not be rushing to take up any of the bonds given Government’s ability to finance its activities.
“So far, we have not had to do so because Government has adequate financing to cover its activities and therefore we would want to give the public that ongoing chance to be able to buy into this. There has been interest expressed only this week with someone from overseas wanting to know if we still had on the market and therefore we would leave that there until such time it is all taken up or we think we need to intervene to buy some of those securities,” said Haynes.
However, he pointed out that in accordance with the Central Bank Act, the island’s premier financial institution was able to take up some of that government security for a predefined period “where a state of emergency is in place”.
“The presumption is that the state of emergency creates special conditions and I think you would agree that special conditions have been created here with the COVID because of what has happened to the economic contraction and loss of revenue, that in those circumstances we can take up securities on the primary market, not exceeding three per cent of GDP for a period not exceeding five years,” he explained.
Government’s debt restructuring over three years ago saw bondholders accepting longer maturities and lower interest rates.
New bonds now have a natural disaster clause that allow the government to defer payment up to two years in the event the island is adversely affected by a natural disaster. (MM)
