By Dennise Williams, Staff ReporterA $400 MILLION Local Registered Stock (LRS) offer will be made by the Ministry of Finance and Planning today.
The coupon rate is 14.75 per cent and the instrument matures on November 19, 2009. But the money market is in a very liquid state.
Sonia Owen, investment manager at Barita Investments, told Wednesday Business, "I don't expect that this instrument will have much of an impact on the market."
Orville Johnson, chairman of Today's Money said, "The market is so liquid that $400 million is neither here nor there."
Ms. Owen states, "Investors are in a wait and see mode now. There is high liquidity in the market because cash reserves are being held to manage any after-effects of Hurricane Ivan and the oil crisis. People want to be in a position to react. And the Government is not issuing a bigger LRS because, I think, that they don't want people to think that they are desperate."
In fact, this issue is thought to be something of a test of investor confidence and will show whether or not lower interest rates will be acceptable.
Mr. Johnson said, "A full take up of the LRS would indicate investor confidence and how investors see the direction of interest rates."
And because of the recent spike in inflation to 3.3 per cent in September, along with rising oil prices and increasing United States interest rates, investors could also be holding off to see if local rate hikes are in the works.
"I am hoping rates do not go up," Ms. Owen said. "It would be great if the Government could hold back rates. In fact, I believe if it was not for Hurricane Ivan and the oil crisis, interest rates would be lower."
Mr. Johnson adds, "If rates go up, it will be by a small amount. But the country cannot afford high interest rates, and hopefully, things can remain stable. So it is just wait and see."
