LRS auction oversubscribed INVESTORS PUMPED in more than $5 billion to buy $2.1 billion worth of three instruments the Bank of Jamaica (BoJ) offered at an auction of Local Registered Stocks (LRS) on Tuesday, a more than 200 per cent over-subscription. The offer of especially the long-term instruments, with maturities of seven and 10 years, was in keeping with the debt strategy articulated by Finance and Planning Minister Dr. Omar Davies during his Budget presentation in Parliament just over a month ago. Money market players said the interest yield of between 15 per cent and 16 per cent was within market expectations and that the instruments were mainly taken up by a mix of brokers and pension fund managers. The BoJ had offered $700 million each of a three-year, a seven-year and a 10-year debt instrument to be issued today, June 7, and mature on June 7, 2004, June 7, 2008 and June 7, 2011 respectively. However, results of the auction from the BoJ show that investors applied for $1.8 billion worth of the three-year instrument, $2.1 billion worth of the seven-year instrument and $1.5 billion worth of the longer term debt instrument. In a release earlier this week, the Ministry of Finance and Planning said coupon rates would range between 14.375 per cent and 14.75 per cent and interest will be payable on June 7 and December 7 in each year. During his Budget presentation in Parliament in April, Dr. Davies tabled a Ministry Paper which said the principal debt management objectives of the Government over the medium-term would be to satisfy the annual borrowing requirements of the fiscal budget, while ensuring that the debt service burdens were reduced to sustainable levels over the medium term. In order to achieve those objectives, the debt management strategy during the current financial year would be, among other things, to strengthen market mechanisms for the sale of government securities in the domestic market, the Ministry Paper said. It said particular reliance would be placed on using the auction mechanism for the sale of LRS, the government's primary debt raising instrument. The Ministry Paper said the auctions, first introduced in October 1999, would be conducted on a monthly basis and would include offers with maturities of seven years and over. During the financial year 2000/01, about 18 per cent of new LRS issued had a maturity of seven years and over, with 10-year issues comprising 12 per cent of the new instruments. The objective is to increase the share of seven and 10-year issues to 50 per cent during the current financial year.
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