Eustace may have admitted to giving inaccurate information
News
January 29, 2013

Eustace may have admitted to giving inaccurate information

Leader of the Opposition Arnhim Eustace may have admitted that he made an error in stating that the $40 million bond issue floated in 2012 was undersubscribed.{{more}}

“It is true that I said bond, and the truth is that it was the Treasury Bills,” Eustace said yesterday on the “New Times” programme on Nice Radio.

But he also said having a 91-day Treasury Bill that is undersubscribed is worse than that of a longer-term bond.

“A fella might be willing to take a risk for 91 days and therefore when you have a 91-day treasury bill that is undersubscribed, it is worse than for a 10-year bill”.

Eustace said that in the case of Treasury bills, the interest is taken out, so what has to be repaid is the interest itself.

“So when the Prime minister says I lying and whatever, there was a shortfall and the shortfall at the Treasury bill was worse because it was smaller in the amount. So if there was a $388,000 shortfall on $25 million, that is worse than a $388,000 shortfall on $40 million, which the bond was,” the leader of the opposition said.

“So I just say what I have to say about that; but all that is red herring and Gonsalves knows that too,” he continued.

But Prime Minister Dr Ralph Gonsalves in a January 21 letter to Eustace asked for a public apology to correct a statement made about the $40 million bond issue being undersubscribed.

He said in the letter that the 91-day Treasury Bill of $25 million which was “unusually undersubscribed” was placed on the Regional Government Securities Market (RGSM) on the day after the New Year’s Day Holiday in 2012.

“… and some of the regular investors in our Treasury Bills were unprepared and did not participate,” the letter continued.

Eustace in his presentation during the Budget Debate in mid-January said although the prime minister claimed that the bond issue was oversubscribed, he quoted from a document published by First Citizens Bank.

Eustace said “The sole undersubscribed position resulted from a St Vincent auction held on January 4, 2012. The issue closed short EC $388,000.”

But the prime minister pointed out that relevant information was omitted in the excerpt Eustace read out.

The entire quote reads: “On the Regional Government Securities Market (RGSM) fourteen 91-day Treasury Bill issues, two treasury bonds, and one corporate note were auctioned. All but one of the T-Bills auctioned closed with oversubscribed positions with the more recent ones in April closing heavily oversubscribed for St Lucia and St Vincent, with bids amounting to more than twice the issue sizes.
 
The sole undersubscribed position resulted from a St Vincent auction held on 4 January 2012. The issue closed short XCD388,000, but still managed to close at 5.5%, below the maximum discount rate of 5.82%. This was as a result of the market moving to secure allotment in anticipation of late bids which failed to materialize…” (DD)