Published: Wednesday June 18, 2008
Government has issued bonds worth $1 billion as a savings option for RBTT shareholders and other investors and as a measure to mop up excess liquidity in the local financial system.
The Central Bank is also continuing sterilisation measures to ease the pressure of rising inflation and to absorb the effects of the $4.7 billion RBTT shareholders will receive in cash with the completion on Monday of the $13.7 billion deal that saw the Royal Bank of Canada acquiring the RBTT banking group.
Initially announced by Finance Minister Karen Nunez-Tesheira in Parliament last Friday, the government bond issue was made available to investors on Monday and will mature in nine years.
The bond issue has a coupon rate of 8.25 per cent per annum and is the first Government issue for the year.
Bonds have been issued in multiples of $1,000 and are available through the Central Bank's automated auction system.
The offer closes on June 30 and the bonds will be dated July 2.
Interest on the bonds will be paid twice a year.
Government has said the Bond is being issued to address domestic liquidity management.
Central Bank deputy governor Joan John said yesterday that the Bank was in contact with investment firms in the private sector who are preparing other financial products to foster investment and alleviate liquidity.
With Government offering the bond issue, she told the Express in a telephone interview that investors may consider this as one alternative.
The Central Bank will continue to monitor the system and will execute its normal operations to address liquidity concerns caused by the RBC transaction as well as other factors that could affect inflation.
John said the Central Bank would continue to take measures to retain control inflation.
One of these measures implemented by the Central Bank in recent months has been to increase the reserve requirement of commercial banks in the country.
Another has been the increase of the repo rate (the Central Bank's overnight lending rate to banks).
This in turn has forced banks to raise lending rates for banking products such as a car loans and mortgages in an effort to reduce credit expansion in the country.
Leading economists have suggested that the Central Bank may adjust the repo rate upward again to further alleviate consumer spending and credit.
A local financial expert told the Express on condition of anonymity that this latest bond issue does not work well for a country like Trinidad and Tobago that could better use the cash for development. The expert suggested that it was another example of Government "crowding out" the private sector and simply sterilsing the funds.
Source: Trinidad Express Newspapers
http://www.trinidadexpress.com/index.pl/article_business?id=161340834
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