By Dennise Williams, Staff ReporterTHE MINISTRY of Finance & Planning has offered for public subscription a 33 month Investment Debenture 2006 Series 'Ac' at 24.625 per cent.
Opening yesterday and closing next Monday, the government will be looking to local investors to place their money to support the budgetary requirements. Unlike Local Registered Stock, the government has no restrictions on the amount of money it can accept from investors in debentures.
The investor will earn interest quarterly and principal will be repaid in two equal instalments on April 27, 2005 and on July 27, 2006. Used to fund the Government's budgetary requirements, the question facing the Ministry is whether or not the public will respond favourably to this offer.
Investment experts interviewed by Wednesday Business expressed cautious optimism. Most said it was too early to tell, but market indicators were in the Ministry's favour.
According to Sonia Owen, senior trading manager at Barita Investments Ltd., the market should respond favourably as there is an upcoming investment maturity due this week and there are no other long-term investment options immediately available.
MARKET REACTION
"I think that the market reaction will be positive because of two reasons," Ms. Owen said. First, there is a big maturity coming up this week. A portion of the principal balances due of Series X and Series Q are maturing on October 23 and 24, 2003 respectively.
Secondly, the Bank of Jamaica (BoJ) has 'gently' helped this upcoming instrument, she said. The BoJ suspended their one-year repurchase agreement last Friday. The longest instrument that the BoJ offers is now six months at 23.5 per cent paid to authorised dealers.
At Edward Gayle, the sentiment was that the success depends on what the market sees as upcoming trends. Said a trading representative, "While actions by the BoJ have made this offer more attractive, if the market feels that interest rates are trending up, then this product will not be successful. People will wait and see."
SIGNIFICANTLY DOWNWARD
If investors believe the exchange rate will move significantly downward, then they will convert Jamaican dollars and buy US dollars and not tie up their money, the Edward Gayle trading representative said. "We are trying to mobilise our clients into investing in the debenture."
At Manufacturers Sigma Bank, a trader said, "We think it is too early to tell if this instrument will be successful. By Thursday or Friday when the October 23 and 24 maturities come into the market, the direction the money takes will give an indication whether the debenture is successful." Previously, the Ministry of Finance offered Debenture 2006 Series "Ab" on July 2003.
