Broker made little effort to market bond issue – PM

Poor marketing is among the reasons given by Prime Minister Dr Ralph Gonsalves that led to the under subscription of a $40 million bond which was auctioned on the Regional Government Securities Market on March 19.{{more}}

According to Gonsalves, the under subscription could be attributed to poor marketing, the recent default on its sovereign debt by a member of the Eastern Caribbean Currency Union and the uneasiness in the long term capital market.

The government auctioned the $40 million bond to assist in the financing of the public sector investment program, the prime minister said.

He noted that he had previously announced that the government would be selling bonds to assist in its capital program.

However, once bidding ended at noon on March 19, a total of 11 bids amounting to EC$25,912,000 was realised resulting in an under subscription of some $14 million.

“The broker made very little effort to market the bond with only eight entities purchasing the new issue, compared with 15 in the maturing issue – the broker did not bring any new investors to the table,” Gonsalves said.

He also explained that the decision had been taken to give the Bank of St Vincent and the Grenadines (BOSVG) the opportunity to arrange the bidding this time around, while investors were required to submit bids through any of the licensed intermediaries on the security exchange.

But Gonsalves noted that while some investors were prepared to purchase short term instruments, others were more reluctant to long term ones as was evident by the under sunscritption.

“People have an uncertainty in 10-year bonds, they prefer to take short term risks given the climate,” he said.

Evidence of this was the over subscription by more than EC$9 million on some treasury bills which were auctioned a week earlier on March 12.

“So what that is telling us, people are looking for shorter term money,” the prime minister said.

He however said that he had been advised that the remaining $14 million on the bond would be sold. (DD)