Published:Friday | January 22, 2016
With the expected influx of billions of dollars in the market to flow from NDX bond redemptions in February, the Jamaican Government looks set to end its three-year hiatus from the domestic bond market and issue fresh debt instruments to absorb the liquidity.
The new issues will likely be listed on the Jamaica Stock Exchange’s bond platform.
More than $60 billion of NDX bonds are due to mature, but the Ministry of Finance is also to pay out an additional $9 billion to $10 million in interest on its portfolio of domestic debt.
Finance Minister Peter Phillips and his central banker, Brian Wynter, have been knocking heads on containing the monetary effects of the maturities.
“There’s been quite a bit of discussion and, in some cases, concern about what will happen with this liquidity event,” said Phillips.
“Both the Ministry of Finance and Planning and the Bank of Jamaica are actively managing the process and it is expected that the Government of Jamaica will re-enter the domestic market next month to ensure that we do our part to revive the domestic capital market that have been in a state of some dormancy with respect to Government issues.”
Debt restructuring
The finance ministry’s last major activity in the bond market was the restructuring of the debt in early 2013 as a precondition of the bailout agreement with the IMF.
The ministry now has $853 billion of outstanding bonds, which the upcoming NDX maturities would have cut to just over $790 billion. Another bond valued at about $6 billion is also due to mature in September.
The World Bank’s country representative, Galina Sotirova, had suggested that the ministry consider rolling over the bonds.
Phillips, who raised the issue of the upcoming ‘liquidity event’ on the final day of the JSE Investments & Capital Markets Conference in Kingston, says the payout would provide stimulus to the Jamaican economy, but that he had also taken note of some of the soundings from the market.
“There is already expressed, not only interest in the Government’s re-entry but there is great interest in commercial paper, and we will be working together with all stakeholders in the market to ensure that it is not a disruptive event,” the finance minister said.
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