Following decades of attempts to add Bahamas government registered stock (BGRS) to the Bahamas International Securities Exchange (BISX), the first day of trading closed last week with all 220 tranches of government bonds valued at $3.6 billion finally being added to the capital markets.
The Ministry of Finance announced a year ago that the entirety of government’s portfolio of BGRS would be listed on BISX and available for trading before the end of 2019, however there were setbacks.
During a press conference on Thursday last week, Deputy Prime Minister and Minister of Finance Peter Turnquest heralded the long-awaited launch, adding that it will improve the country’s financial market infrastructure and increase accessibility to government-backed investments for all Bahamians.
“History will record July 9 as the official launch of electronic trading for government bonds and other securities on BISX. I commend The Central Bank of The Bahamas and the Bahamas International Securities Exchange for their cooperative efforts with the Ministry of Finance in achieving a new and critical milestone in the development of the Bahamian capital markets,” he said.
“We are proud to be one of the first Caribbean nations to trade our public debt via our national stock exchange and we look forward to working with BISX on other projects that benefit Bahamian investors.”
The instruments represent the government’s entire portfolio of outstanding securities dating back to 1999 and hold maturities ranging from 1 year to 30 years.
Central Bank Governor John Rolle, who was also present at the press conference highlighting the first day of trading, said the new modernised infrastructure provides context for improved transparency and efficiency in both public and private sector debt market operations, while offering a more enabling environment in which mature private firms can raise financing.
“This infrastructure will draw investors more conveniently into the secondary trading process, as counterparties to both sides of the buying and selling of government securities. This will increase the transparency around the determination of market prices. Up to this point, the Central Bank was commonly the second participant and therefore, the facilitator of most secondary trades. The Central Bank, as issuing agent, will continue to facilitate primary market offerings of government bonds and participate, when necessary, to support secondary market liquidity,” he said.
“Nevertheless, the average investor’s ability to participate in the market will not be impeded. Government bonds will remain accessible to every Bahamian who wishes to invest, either through a licensed broker-dealer or directly through the market desk at the Central Bank. The minimum investment in any government bond is still $100.”
Recalling that it had been the goal of BISX to have government bonds traded on the exchange since its inception in 1999, BISX Chief Executive officer Keith Davies said after 20 years, five government administrations and three governors of the Central Bank, it is a momentous occasion.
“It is very personal to me and an achievement that I celebrate with all of my colleagues, the directors and shareholders of BISX. And I want to congratulate the minister publicly, with a touch because that would have only have happened because the minister made it happen. Throughout the years, successive ministers have talked about it but they didn’t make it happen. He made it happen and with the support of the governor of the Central Bank, we were able to achieve this,” he said.
“And so we are now at a point where you have an exchange, regulated and properly operating in the country, fully electronic, bringing on government securities. So we will bring the confidence, the transparency and security that people have come to expect with BISX and lend it to BGRS.”
The move to BISX will help the government to obtain more efficient, market determined pricing of its securities, which will be a key input into the pricing of other private and public sector market issuances, Turnquest noted.
It also further empowers the Central Bank to perfect indirect monetary policy tools, to influence changes in interest rates in the economy.
“In moving forward, special attention is being paid to the small, individual investors to allow them to have continued and improved access to government securities. The public could expect the Central Bank to make further announcements on these matters, as the government and its stakeholders seek to improve the operational regime for the issuance of government paper,” Turnquest said.
He noted that it also falls in line with the government’s strategy to accelerate critical reforms, with an emphasis on modernization and digital transformation.
“This is another milestone in the evolution of the Bahamian capital markets. It makes good on a key component of our overall initiative to strengthen the public debt management framework and promote the development of the government bond market. In the long term, it will help to reduce the government’s overall funding costs associated with the issuance of these securities,” he said.
“Investors will also benefit from the greater ease of purchasing and transacting these instruments and this will have the effect of allowing more and more Bahamians to undertake and benefit from these very stable investment instruments.”