Central Bank to create savings bond for small investors

The Central Bank of The Bahamas (CBOB) announced in a statement yesterday that it will create a savings bond for small investors that is expected to launch in October, as it makes changes to the way it transacts government securities.

“The Central Bank is collaborating with the government to develop a savings bond for launch in April 2023,” the statement said.

“The purpose of the proposed savings bond is to provide smaller investors with an alternative savings vehicle that offers simpler characteristics vis-à-vis BRS [Bahamas registered stock], treasury bills, government agency securities, and other retail savings options.

“While the savings bond will incorporate some characteristics of existing government securities, they will not trade in the secondary market, thus eliminating potential price volatility associated with conventional market principles.

“The Central Bank will release further details on this initiative over time.”

Small investors have complained that it has been harder for them to be included in BRS 

subscriptions, as bids have gone to bigger investors who can afford a lot more.

The CBOB said it continues to improve its processes to align with international best practices. It said initiatives like the savings bond and others will work towards the bank achieving those standards.

The statement added that starting on January 2, the Bahamas Registered Stock BRS initial public offerings (IPOs) will now open and close on a single day, similar to treasury bill tenders.

“Broker dealers will accumulate customer subscriptions over multiple days prior to the IPO and book combined subscriptions with the Central Bank on the offer date (also called the ‘open day’),” the bank said.

“This would still allow investors sufficient time to participate, and investors may notice minor changes to the offering prospectus as a result.”

The statement also added that in cooperation with the Ministry of Finance, CBOB will initiate a “simplified allocation methodology” for government paper, leading to individual investors who subscribe up to $250 no longer being prioritized.

“Instead, the bid allocation process will consider the bid value, the total value of all valid bids, and the total offering amount,” the statement said.

“The methodology will prorate allocations across all bidders (individuals and institutions). In some cases, when offers are oversubscribed, very low-value bids are less likely to receive allocations.”

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Chester Robards

Chester Robards rejoined The Nassau Guardian in November 2017 as a senior business reporter. He has covered myriad topics and events for The Nassau Guardian. Education: Florida International University, BS in Journalism

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