By Stewart Miller

NG Business Reporter

stewart@nasguard.com

The subscription period for a $60 million Bahamas Registered Stock (BRS) issue opened Monday, offering investors rates starting at prime – currently 4.75 percent – and maturity tranches out to 2028.

Well-known to institutional investors, many smaller individual investors still are not aware that they can access government bonds, according to CFAL's Sr. Research Analyst Jamaal Stubbs. He told Guardian Business yesterday the BSR represented a strong investment opportunity for the individual investor too, particularly for those already exposed to the capital markets seeking to diversify their portfolios.

A strong vehicle for capital preservation, Stubbs said that globally sovereign debt tends to be the safest investment vehicles available in their particular markets, although the less aggressive returns they offer reflect the low level of risk they pose.

Locally, however, with a $100 minimum investment and additional investments in $100 increments, for individuals BSRs offer returns far above those they could typically get from bank savings and term deposits – with greater security. Backed by the full faith and credit of The Bahamas government, Stubbs said they are safer than banks deposits, particularly for investors who will exceed the $50,000 insurance cap for Bahamian dollar bank deposits.

"Banks would fail before a strong-rated sovereign would," Stubbs said, adding that the governments generally have greater ability to raise revenue to meet debt-servicing requirements than private entities in their jurisdictions.

The Bahamas recently suffered a credit ratings downgrade from Standard & Poor's to BBB/A-3, down from BBB+/A-2. But Stubbs said that even so, the government bonds are 'investment grade' and the security was one he would recommend.

Liquidity is a lingering concern for investors in many Bahamian securities, but according to the research analyst there is a brisk secondary market for the safe government bonds. In fact, he said he would lean to the tranche with the longest duration to maturity and highest interest rate.

When the investor needs to sell his position, he would have had the advantage of the higher interest rate and is likely to find a ready market for his securities, according to Stubbs.

Although named a 'stock,' the security is not an equity holding and carries a fixed rate of return.

The BRS issue is available in five tranches with maturities in 2016, 2018, 2020, 2026 and 2028. The 2016 issue carries the prime rate, and the following years offer interest above prime at 1/64 percent, 1/32 percent, 5/64 percent and 3/32 percent, respectively. The securities will be repaid on November 10 in its maturity year.

The tranches each have a $10 million allocation, with the exception of the 2028 issue of $20 million.

The government's monthly Treasury bill tender for November has already been fully allotted, according to a release from the Central Bank of The Bahamas (CBB). Those bills carry shorter terms, with a $74,209,000 91-day tranche and a $58,000,000 182-day tranche. According to the CBB, they were allotted at bids averaging 99.85 percent and 99.3 percent, respectively. That translates into average discount rates per annum of 0.60 percent for the 91-day and 1.34 percent for the 182-day bills.