KINGSTOWN, St. Vincent – The state-owned National Insurance Services bought EC$5 million of the EC$40 million in government bonds auctioned last month while the Trinidadian firm contracted to help with the sale retained half of the instruments.

The private sector bought the remainder and, “That’s all you need to know,” Prime Minister Dr. Ralph Gonsalves said at a press briefing on Tuesday in response to Opposition Leader Arnhim Eustace’s questions about who bought the bonds.

The bond were floated on the regional securities market on April 27 and Eustace said the small oversubscription of EC$285,000 suggested a lack of investor confidence in the country’s financial situation.

But Gonsalves said that the instruments sold out within 90 minutes. “This reflects confidence in the management. Because people are not going to take their money and buy bonds if they know you are shaky.

“I am not saying we are out of the woods,” he, however, stated during the press briefing in which he announced that the economy grew 0.41 per cent in 2011, after three years of decline.

“Why you want to sell more than you have?” Gonsalves said in response to Eustace’s comments about the small oversubscription.

Eustace, a former prime minister and minister of finance, had noted that this country’s previous bond issues were oversubscribed by as much as EC$10 million.

Gonsalves said his government engaged Trinidad’s First Citizen’s financial services to prepare the relevant documents, advertising, and contact entities and individuals who would be interested in purchasing the bonds.

“They decided that it’s a good investment. So, apart from working with us, … they agreed that they will take EC$20 million of the bonds for themselves and to on-sell to their clients,” he said.

He said the firm bought the bonds “as an early mark of confidence,” adding, “That’s the market speaking.”

“Now, let’s face it: if [someone] goes and makes an investment and buys bonds, you want your name to be in the newspaper…? Is it not your business?” he said in response to Eustace.

Gonsalves said the government would know who bought the bonds because it has to pay them interest.

He said that while he is answerable to Parliament and the people about state entities that buy bonds, he “can’t go about and talk other people’s business”.

He defended as “sensible” the NIS’ purchase of the bonds, saying that the company’s policy is to try for an average of 6.5 per cent interest on its investment.

“[This] means that you have to take some risks in the current climate. But, if you are buying bonds from the government, which has never defaulted, and you are getting 7.5 [per cent], you are ahead of the game,” he said.

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