Central Bank Governor John Rolle noted that a public education campaign regarding the initiative will be conducted. The first sale of bonds will start in November with an initial offering of $5 million, followed by targets between $10 million and $17 million over the fiscal year, depending on public interest.
Described as a low-risk, short- to medium-term product, the Central Bank, acting as arranger and registrar, stated that bonds could be purchased in increments as low as $100, broadening the investor base for public sector funding and further developing the domestic market for government securities.
The savings bonds will be issued in four maturities: one, two, four, and six years. The fixed interest rate will be set at fifty basis points (0.5 percentage points) below the coupon rates of Bahamas Registered Stocks with similar maturities. Participants must hold the bonds for a minimum of six to twenty-four months, depending on the tenor.
Bonds will be redeemable semi-annually on interest payment dates, and a penalty equivalent to 91 days’ interest will apply if a bond is redeemed during the lock-in period. Investors can purchase up to $50,000 in bonds through initial public offerings or over the counter at the Central Bank.
Savings bonds will be non-transferable and will not trade on a secondary market.
Governor Rolle stated: “The objectives are more about encouraging savings rather than providing the government with any substantial new source of funding. While the government can utilize any funds raised, a $10-$17 million savings bond is not intended to impact major borrowing needs, which are in the hundreds of millions of dollars each year.”
The bonds will offer interest rates comparable to those of Bahamas Registered Stocks of similar maturities, exceeding returns available on bank savings. The program aims to modestly broaden the investor base for public sector funding and develop the domestic market for government securities. It is anticipated that some new investors may eventually transition to Bahamas Bahamas-registered stocks or Treasury Bills.
The Central Bank also noted key differences from existing Bahamas Registered Stock. Only Bahamian citizens and permanent residents can purchase the savings bonds; institutional investors and entities are excluded.
Governor Rolle explained: “This program is designed to facilitate easier access to savings opportunities and encourage increased savings by allowing individuals to build their holdings in affordable increments. It will enable investors to benefit from interest rates that are as good or better than those on fixed deposits. Individuals will have the flexibility to withdraw savings early if needed, and the program aims to expose more people to investing, cultivating the discipline of sticking with investments until maturity, thereby building confidence to invest in other products like Bahamas Government Registered Stocks and Treasury Bills. The risk associated with holding savings bonds is minimized as their face value will remain unchanged over the investment’s life.”
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