Appetite for govt debt on capital markets growing

Just three months into the first trading of Bahamas government registered stock (BGRS) on the Bahamas International Securities Exchange (BISX), the appetite for government debt on the capital markets is growing, BISX Chief Executive officer Keith Davies said.

Trading went live on July 12 on all 220 tranches of the government bonds, valued at $3.6 billion.

“We’ve received a lot of interest. The government debt market is probably going to turn out to be the most active market when all is said and done. When we only had a few government BGRS, they had another issuance under another program and we had listed those on the exchange – those were one of the most actively traded securities on the exchange. So, we expect that trend to continue, which is typically of markets that engage government securities,” Davies told Guardian Business yesterday.

“They’re the safest and most secure securities of any market. So, we’re seeing a great deal of interest. We’re receiving a lot of inquiries asking us for more information about what is listed. We have all 200-plus tranches on the exchange. People ask us for specific ones that they’re looking for and we direct them to where they need to go. So, that is a very positive sign.”

Given the appetite for BGRS, Guardian Business probed the BISX chief on whether he believes there is an appetite for local government funding in the wake of the recent successful pricing of a $600 million foreign currency bond.

Davies was steadfast in his position that he could not say whether that type of transaction could happen locally.

Still, he said, it depends.

“I can’t say. That’s too much speculation for me. I tend to stay out of that. Could they? Absolutely. Will they? I don’t know. Like any other issuers of a security, they’re going to take all factors into consideration, appetite, capacity, need. So, they will factor all of those elements into whether they make that determination,” Davies said.

“There are so many factors that go into that. Timing is very critical. I do know that the government had always planned – and this is something they’ve always said – that they wanted to have an air of transparency around the exchange. But they also want to get into a schedule of fundraising. Governments tend to issue government debt on a regular basis and only when certain things happen, they would then increase the level with which they place these funds, based again on need and appetite. It’s a hard question to ask any of us in the industry because it depends. Ask me that tomorrow and I would say it depends on something else.”

As for those bonds currently being traded, Davies said he only sees that there is going to be growing interest as time goes on. 

“Before, you never knew what was available. You never knew the amounts. You had to essentially go to the Central Bank, you had to wait. You can now go to one place, the BISX website. You can search, you can find the information and you are able to then take that information, find a broker and make targeted transactions based on your interest and your investment appetite and profile,” he said.

In the most recent BISX second quarter statistical report for the six-month period ending June 30, 2020, the BISX All-Share Index closed at 2124.69, down just 4.79 percent compared to the previous year.

At the end of the second quarter, there were 19 ordinary shares on the market with capitalization of $4.531 billion, seven preference shares with capitalization of $243.11 million and 11 bonds with a face value of $507 million.

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