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6.The Nuts and Bolts of the Regional Government Securities Market
Extract

The Regional Government Securities Market (RGSM) became operational in November 2002, when the Government of St Kitts and Nevis came to market with a bond issue of $75 million. Within the first six months there have been three issues of treasury bills on the RGSM, by the Government of St Vincent and the Grenadines, each in the amount of $16 million. These were in March, April and May, 2003.

This was not the first time that either of these governments was offering securities, since both of them have issued treasury bills and bonds in their respective countries from time to time. However it was the first time that investors from all of the eight ECCU member countries were able to participate in the issues of the bonds and bills by these two governments.

Prior to the start of the RGSM, each government was free to set the terms and conditions for the issue of their own securities, which were purchased by the citizens and residents from the Treasury Department in the particular country. Now however, the market is expected to play a much larger role in determining the terms and conditions of each offering. This is so, because as a number of similar instruments become available to investors, the terms and conditions that they offer will need to be attractive. Obviously investors are most likely to choose the instrument that is the most appealing. But how can the investor determine this?

Any such decision must be made on the basis of information - information about the particular security, and most importantly, about the economic and financial position of the issuing country. All participating governments are required to provide standard information in a document called a prospectus. The prospectus will include details about the issue, for example, the type of instrument, the issuing government, the issue date, the amount being issued the terms and conditions, the deadline for submitting bids and the list of participating licensed financial intermediaries. The economic and fiscal information provided includes details about economic growth, the performance of various sectors in the economy, the country’s balance of payments situation and public finances. Copies of the prospectus are available from the licensed broker dealers.

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