Category Archives: Business
The recent article from the Trinidad and Tobago Business Guardian shows how local private sector companies can benefit from the continued low interest rate environment in Trinidad and Tobago. Neal and Massy, now Massy Holdings Limited was able to secure TT$1.2 billion in two tranches, both providing investors with a moderate premium over the current Central Government (GORTT) bond rates of around 3.0% for 15 years and 2.5% for 10 years. In addition, FCB, was able to raise TT$500 million also in two tranches. The FCB bonds also provided investors with a slight premium over the current GORTT yields, however less than that of Massy Holdings, and likely due to the fact that FCB is a ‘quasi-sovereign’ banking institution that had a very successful IPO in 2013.
Both institutions utilized the low interest rate environment to acquire cheap financing for the use of future strategic investments and reducing current interest expense. Taking advantage of the current low rates is an important and strategic decision for many institutions in the nation, and opportunities such as these should be taken when possible.
Having said that, the primary bond market in Trinidad and Tobago has been quiet for the year thus far. Apart from the 7-year 2.2% coupon GORTT bond issued by the Central Bank (CBTT) in June 2014, the market has been flat with very few institutions issuing over the period. Hopefully we can see more private sector companies accessing the primary bond market and taking advantage of the low rates over the next few months. This would be an ideal time for companies, new and veteran to the local bond market, to seek and obtain cheap money for investing and reducing interest expenses.
In addition, with the US Fed tapering its US$85 billion bond purchase program since late 2013, and analysts forecasting a rise in US interest rates as early as 2015, it could be expected that the domestic rates in T&T could begin rising sometime after (Obviously T&T has many other monetary policy metrics to satisfy before such decisions at CBTT can be made). Therefore, time may be running short for local companies to access favorable rates.
On that note the anticipated TT$1.5 billion bond by TSTT would at least provide one more private sector issue in the local primary bond market.
Article discusses the thought that Economics is a cumulative science and learning the history of economics is unnecessary, however, there are 3 main reasons why it should be taught and understood.
Has the Brain Drain of Top Scientists Caused the US to Lose Its Edge? | Dr. Kaku’s Universe | Big Think
The S&P showed some inefficiencies in their analysis and ratings in the past. Now, their ratings are likely based on political actions, therefore, punishing the government with a downgrade because of a lack of ability to agree on fiscal and monetary policy.
“But Congressional Republicans deserve much more of the blame. For this calamity was entirely man-made — even intentional. The contemporary Republican Party is fixated on taxes. It possesses an iron-clad belief that the existing tax rates should never go up, that loopholes shouldn’t be closed unless they’re offset by other tax reductions, that the fact that hedge fund managers pay lower tax rates than school teachers makes complete sense, that a reversion to the tax rates of the prosperous 1990’s or 1980’s would be unacceptable.”
This just shows that the government system, with a ruling party and an opposition, makes financial decisions more difficult when individuals have different beliefs on economic policies. Is taxes are so bad, then fiscal expenditure should be increased to allow job creation and growth.
If other credit rating agencies do not have plans of downgrading the US ratings in the near future, then it is likely that their calculations are different from that of the S&P’s.
Again, in this economy with struggling unemployment rates, the government dropped the ball on an early and constructive debt deal, and the S&P took an early and exaggerated stance in downgrading the US, now making it slightly more difficult for the economy to fully recover.