Jun 2012 Financial News

Bonds are sound (Barbados)

Jun 04, 2012

With Barbados placing more of its debt instruments on the local capital market, the Governor of the island’s Central Bank, Dr. Delisle Worrell, has underlined the soundness of these and other Government issues. “There is no question about the soundness of domestic bonds,” Dr. Worrell told a recent news briefing at the bank’s headquarters.

Last Tuesday two Barbados Government issues totalling $150 million were opened for subscription on the local capital market. They are made up of a $50 million issue of six per cent treasury notes and a $100 million issue of seven and three quarter per cent debentures. The Treasury notes are five years and the Debentures for 20 years.

Last year some analysts were expressing opinions about instruments issued by governments across the region in light of worrying economic fundamentals like high debt-to-GDP ratios. They said that this and the uncertain economic outlook for Barbados and the region did not allow for an accurate pricing of bonds.

They have also been suggesting that regional countries are not too far removed from Greece, one of the sick economies in the Eurozone.

Stating that this country’s track record speaks for itself, the Governor said that one can go back and see there has never been a case where bonds of the Barbados Government have not been serviced to the fullest and on time. “I have laid out for you the scenario in terms of our debt-to-GDP ratio,” he said.

However, dealing with the European country which many have come to refer to as one of the sick economies in Europe, Dr. Worrell said that the problem with Greece is that they have a lot of short-term obligations which they cannot be assured they can actually service. He explained that in order to service them the Greek authorities have to roll over the bonds “so every six months they have a whole bunch of debt held by the banks which are told that Greece is a bad risk and we cannot hold on to the bonds,” he further explained.

“We are not in that position. Our bonds are secure, our bonds are paid off when they become due,” he said. In response to a query about the rating agencies that had concerns about the debt, Dr. Worrell said that those people do not understand the Barbados economy.


Source:
Barbados Advocate
Monday June 4, 2012

http://www.barbadosadvocate.com/newsitem.asp?more=business&NewsID=25107