Wednesday, April 24, 2024

Report: Bonds looking good


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WITH THE CENTRAL BANK about to report on the island’s first quarter economic performance next week, Barbados has received some positive international news about its investment bonds.
Bloomberg, an international financial news agency, said Barbados’ investment bonds “are heading for the second-best performance in emerging markets this month”.
And it said this was taking place “as investors gain confidence in the Government’s plan to narrow a budget deficit that prompted the firing of 3 000 public workers”.
Canadian Imperial Bank of Commerce, Toronto, market strategist John Welch, was quoted as saying: “Once people got over the panic we had earlier this year, they’re looking for some kind of yield. [The bonds] . . . are still discounting a pretty high probability of default for Barbados, which we don’t think is there if they continue with their current plan.”
In an immediate response yesterday, president of the Barbados Economic Society (BES), Jeremy Stephen, said when the island’s creditworthiness deteriorated it was reflected in its high interest rates, making the bonds cheaper.
“So to see a reversal of that position by 79 basis points or 0.79 per cent is an improvement in the confidence that international investors have in our debt,” Stephen pointed out.
At the same time, the economist warned that even though Barbados’ international investors were feeling some assurance about the island’s economic position, the country “was not out of the woods; we are still in junk bond territory . . . . It is still fairly expensive for Government to meet its international obligations”.
The BES president told the SATURDAY SUN: “What investors did note was that the Barbados Government has not been slow to repay on its international loans and that is going to engender confidence. Most importantly, there seems to be a general agreement with the austerity measures being put in place by Government and its commitment to those austerity measures.”
Stephen said what the Bloomberg article revealed was that “despite the sentiment that we have locally, investors internationally agree . . . that the Government is following a path that will return the island to some semblance of balance and some semblance of recovery”.
He even held out hope that the improving position could influence the international rating agencies to raise the island’s credit rating.
“Maybe the rating agencies might decide to use the market sentiment to change our rating sometime in the near future,” Stephen said.
Asked whether this development could translate to improved local confidence in the economy, he said the one thing that would inspire improved confidence on the ground was real economic growth.
Meanwhile, Opposition spokesman on economic Dr Clyde Mascoll in a brief statement said Barbados was expected to outperform its new classmates since the downgrades by the international credit ratings.
“It has joined the emerging markets. So in the context of this article what is more important is that Barbados is expected to borrow a further $75 million through Credit Suisse that is to be used to repay the very bond which it recently raised and this will be done at very high cost given the overall concerns about Barbados risk going forward,” Mascoll said. (GE/SC)

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