Ashford W. Meikle, Staff Reporter
Minister of Finance and Planning Dr. Omar Davies. - NORMAN GRINDLEY/DEPUTY CHIEF PHOTOGRAPHER
INTERNATIONAL CAPITAL markets yesterday snapped up the Government of Jamaica's (GOJ's) 30-year US$250 million ($16.2 billion) global bond.
This comes after the news that ratings agency Standard and Poor's (S&P) maintained its "B" rating for Jamaica in its latest report last Friday.
Minister of Finance and Planning Hon. Dr. Omar Davies said in a statement that the reaction of the market demonstrates continued investors' confidence in the management of the economy. He added that the issue also serves to achieve a major objective of the Government's debt management strategy, that of extending the maturity profile of the debt.
The funds raised are to be used to pre-fund the Government's 2006/07 external borrowing programme.
BULLISH ON THE NEWS
Analysts with whom Wednesday Business spoke were bullish on the news, pointing to the increased confidence that the international capital markets have in Jamaica.
"I think this is a historic day for the country. This is the first 30-year bond [we have] issued. It shows a high - very high level - of confidence by the international markets," commented senior manager for treasury at Dehring Bunting and Golding," Clay Moodie.
Within hours of the announcement of the bond, it was oversubscribed by some 60 per cent raising some US$400 million (J$26 billion) even though, with a coupon rate of 8.50 per cent, it is the lowest coupon offered on any GOJ instrument. The yield rate on the bond will be 8.55 per cent.
The bond, given a 'B' ratings by S&P had Deutsche Bank Securities Incorporated as its lead manager. According to a press release issued yesterday by the Ministry of Finance, "The terms of the bond compare favourably with the US$250 million 20-year 9.25 per cent issued in October 2005."
Moodie pointed out that the success of the instrument will "open up emerging market funds [and] more hedge funds to Jamaican debts because [international capital markets] like the longer end of securities. The 30-year instrument is the major benchmark and while we are accustomed to short-term debt issuance they are not. A lot of pension funds and hedge funds [in the U.S.] invest specifically in long-term securities."
CONFIDENCE IN JAMAICA
Said the chairman of Today's Money, Orville Johnson, "There is quite a bit of confidence in Jamaica. One of the things coming out of the ratings agency is the commitment to fiscal discipline - they watch that more than anything else."
Up to December last year, the Government's revenue and grants target of about $145 billion was off by some $17 billion, or 12 per cent. Expenditure was two per cent ahead of target and up to the end of the April to December fiscal period, the fiscal balance had a deficit of $13.6 billion.
Looking at the pricing of the bond, Moodie noted: "Jamaican bond prices have had a fantastic run since the beginning of the year. A massive demand has driven up prices so right now the 25 years are yielding - on the offer side - 8.48 per cent."
