One of the perils of story placement, in print or online, are things like the picture below. Bermuda Finance Minister Bob Richards won’t be thrilled with the juxtaposition of the Bermuda bond sale and falling bond yields, but maybe he doesn’t care since all the bonds were sold.
The bonds were sold at a pretty high coupon compared to the yields on many other sovereign bonds. US 10-year Treasuries currently yield 2.88% wh
ile Canadian bonds are slightly lower. Germany, surprise, surprise comes in at 1.88%, while Brazil, where people have gone sour on the economy, is at 4.67%, which is comparable to Bermuda. After five years of recession, and given Bermuda’s narrow economic base, a 4.75% coupon is probably pretty good.
However, Richards’ bet is that interest rates will rise, meaning Bermuda has locked in a low rate, even though it is borrowing more than it currently (or hopefully, ever) needs. If that doesn’t happen, the debt will be needlessly expensive.
- Bermuda Government Borrows $750 Million (bernews.com)