By Lavern Clarke, Staff ReporterGOVERNMENT'S LATEST investment debenture, series Ab, has been doing 'moderately' well, market analysts said yesterday, but none were prepared to make a call on how much in new debt the unlimited offer was likely to raise.
The offer, which closes today, is on the market at a fixed 28.5 per cent, and is the third investment debenture placement by the Ministry of Finance this year but has a longer tenor and is the least attractively priced.
Mark Walters, vice-president, treasury, for investment bankers Dehring Bunting and Golding (DB&G), said the take-up of the instrument has been "fairly good" with the demand coming from both individual and institutional investors, and that there was likely to be an even greater rush to buy today when the offer closes.
In April, the Ministry of Finance put the first investment debenture on the market at a sweet 36.25 per cent price. The market gobbled up the offer, pulling $14.3 billion into the Government's coffers in the process.
In June, another debenture hit the market at 33.5 per cent - 2.75 percentage points lower than its predecessor, but in line with plans to bring interest rates down. This time the coffers swelled by $9.4 billion. Both had tenors of 19 months.
The current instrument has a 31-month tenure, and is set to mature in February 2006. Interest will be paid quarterly starting October 16, 2003.
Liquidity conditions are relatively strong in the market at the moment, which the financial houses to which Wednesday Business spoke said is likely to have a positive impact on the take-up.
Bruce Miller, trading manager at Jamaica Money Market Brokers (JMMB), said that between July 10 when the offer opened and today, just about $10 billion would have entered the market from maturing Certificates of Securities Held (COSH) instruments.
In addition, Miller notes that the price on the new debt instrument is slightly more attractive than the central bank's prevailing one-year open market rate, and that JMMB has also seen "a wide spectrum of investors" going after the debenture.
The analysts all stayed clear of making a call on whether the take-up on the current offer will come close to the last debenture.
"You can't speak totally as to what is going to happen," said Lissant Mitchell of Pan Caribbean Merchant Bank. "I think it is going to be relatively attractive there is quite a bit of liquidity in the market."
According to Walters, debenture Ab's performance "will depend on where investors see interest rates trending."
Noting that rates have been trending down, the DB&G vice-president said investors will likely want to jump into the market now to take advantage of the fixed offer rate, but only if they remain convinced that interest rates will continue to fall.
Walters' take is that rates will decline further, given developments in respect of the improved foreign exchange inflows from tourism, and improvements in the budget deficit in the fiscal first quarter.
The Bank of Jamaica has already reduced repo rates three times since April bringing the 365-day rate down from 35.95 per cent in March, to 28 per cent as of July 8.
The investment banking executive noted that there is an "85 per cent chance that repo rates will fall again" before the next treasury bill offer, which is scheduled for later this month.
