What is the Regional Government Securities Market
The eight ECCB member countries (Anguilla, Antigua and Barbuda,
Dominica, Grenada, Montserrat, St Kitts and Nevis, St. Lucia,
St. Vincent and the Grenadines) have agreed to establish a regional
market for government securities, with the assistance of the
Eastern Caribbean Central Bank.
The regional market allows member governments to issue their
securities throughout member countries, allowing residents
of these countries to buy the securities of their choice.
This initiative will enhance the investment options available
to investors by enabling investment opportunities beyond the
domestic/home market to the wider region.
What are government securities?
Government securities are financial instruments including treasury
bills, notes and bonds that are issued by a government and sold
to the public to pay off maturing debt and raise capital needed
to finance Government expenditure. Backed by the full faith
and credit of the issuing Government, these instruments are
usually considered safe investments.
Treasury Bills are short-term instruments issued with a term
of one year or less. They are sold at a discount from face
value (par), and do not pay interest before maturity. The
difference between the purchase price of the bill and the
amount that is paid at maturity (par), or when the bill is
sold prior to maturity, is the interest earned on the bill.
Treasury Notes and Bonds bear a stated interest rate, and
the owner receives periodic, typically semi-annual interest
payments. Treasury notes have a term of more that one year
but less than ten. Treasury bonds are long-term instruments
issued with a term of more than 10 years.
What is the ECCB’s role in the Regional Government
The Eastern Caribbean Central Bank acts as Fiscal Agent to
Governments. In this role, the ECCB assists the Governments
by facilitating the operations of the RGSM.
What is an intermediary?
An intermediary is an entity (broker dealer, broker, custodian)
that provides financial services to investors. These services
include buying and selling of securities on behalf of investors
and securities custodian services. Intermediaries dealing
in securities must be licensed by the Eastern Caribbean Securities
Regulatory Commission (ECSRC).
How are government securities sold?
When a government brings a new issue of securities (treasury
bills, notes and bonds) to the market for the first time,
it does so through the primary market. Government securities
issued on the regional market are sold via the Eastern Caribbean
Securities Exchange (ECSE) Ltd.
Treasury Bills are sold on the regional market through a
single price auction where the yield/price of the security
is determined by competitive bidding by investors. Each investor
must submit a bid specifying a yield or price for a specified
quantity of securities. Those bids that fall within the range
accepted by the auction will be awarded the security. Each
successful investor pays the same price (or receives the same
yield) for their securities. The risk associated with competitive
bidding is that an investor might bid a yield that is too
high and not obtain the quantity requested.
Treasury Notes and Bonds may be sold on the regional market
through an auction (as explained above) or on a fixed price
subscription basis where the price is determined by the government
before issuing the securities, and the investor submits an
application for only an amount. Bonds and notes may be sold
at par (face value), discount or at premium, that is, a price
above the face value. Member governments usually sell their
bonds at par value.
How can I get information on upcoming issues?
Announcements with information on securities to be issued
on the regional market are provided to the market quarterly.
These announcements provide a quarterly calendar with details
on upcoming issues which include: the type of instrument,
issuing government, issue date, terms and conditions, auction
or subscription date, maturity date, and deadline date for
submitting bids, names and addresses of licensed intermediaries
participating in the government securities market.
Announcements are also provided in regional newspapers, member
governments’ gazettes and on ECCB and ECSE websites.
In addition, three weeks before the auction date, the government
issuing the securities provides a press release with details
on the issue. This announcement serves to reconfirm details
provided to the market.
How can I buy government securities?
Persons wishing to purchase government securities issued on
the regional market may do so by using the services of a broker
dealer that is licensed by the Securities Regulatory Commission
and is a member of the ECSE. The manes of intermediaries dealing
in the government securities will be provided in announcements
to the market.
Intermediaries will place bids for securities on behalf of
their customers to the ECSE. Investors should submit their
application for securities before or by the deadline stipulated
in the announcements for the issue.
Why should I consider purchasing government securities?
Government securities provide a good savings option as they
are generally risk free and provide a higher return than that
which can be received from a regular savings account Currently,
Interest rates on treasury bills and bonds issued in the region
are generally higher than rates fixed deposits offered by
commercial banks. In addition, government bonds are generally
ideal for savings as they provide long-term savings options.
Whether you are saving for a new home, your children’s
education or retirement, government bonds can help you reach
your financial goals with safety and at market based yields.
How will ownership be recorded?
Investors will receive a confirmation notice indicating the
success of their application for securities. This notice indicates
the amount of securities allotted to the investors and the
market yield/price for those securities. Securities are issued
to investors in a dematerialised form, which simply means
that ownership of the securities is recorded and maintained
electronically by the Eastern Caribbean Securities Registry
(ECSRC). Investors will not receive printed certificates as
previously done, but will be provided with regular statements
of their holdings at the Registry. These statements are legally
considered as evidence but not proof of ownership.
Dematerialisation of securities offers several advantages
over printed certificates including easy trading of securities
and elimination of risks associated with theft and loss or
destruction of physical certificates.
Can I sell my securities before maturity?
Yes. The Eastern Caribbean Securities Exchange (ECSE) Ltd
provides investors with the opportunity to sell and buy securities
(government securities, shares and other financial instruments)
on the secondary market. As on the primary market, investors
will need to place their orders to sell or buy securities
through a licensed intermediary.
Can I use my securities as collateral?
Yes, you may pledge your government securities as collateral
for financial obligations such as loans. Pledging of securities
is done at the Eastern Caribbean Securities Registry (ECSR)
where ownership of the securities is held and recorded.
What happens when my security matures?
On maturity date, each investor will be paid an amount equal
to the face value (principal and interest) in respect of their
holdings of the specific security.
How do I receive interest and principal?
When submitting applications for an issue of securities, investors
must provide the intermediaries acting on their behalf with
bank details such as the name and address of the bank and
the bank account number to which they want their principal
and interest payments deposited. (Payment may also be made
As a potential investor what type of information
should I consider?
In bringing an issue of securities to the market, the Government
is required to disclose certain information to the market.
This information provides prospective investors with insight
into the fiscal performance of the government and the economic
performance of the country to enable them to make informed
An investor’s assessment of a government should include
an examination of the country’s level of outstanding
debt, in particular outstanding debt to GDP and debt interest
payments to current government revenue. Such ratios and data
provide some indication of the country’s ability to
meet current and future debts obligations.
Who will regulate issuers of government securities?
Regulation of the activities of the issuers (governments)
is the responsibility of the Regional Debt Co-ordinating Committee
(RDCC), which comprises the Head of Finance (Financial Secretaries/Directors
of Finance) of each member country.
How can I get more information about the market?
An investor may obtain additional information about the Regional
Government Securities Market from:
i) The Ministry of Finance and Treasury Department
of the member country;
ii) The ECCB as Fiscal
iii) intermediaries established in the market.
Information on the activities of the regional market is also
provided on the ECSE website at www.ecseonline.com.