Government plans to raise $1 billion through the issue of a seven-year bond with a coupon rate of 2.6 per cent.The fixed rate bond is due May 21, 2020.In the information memorandum, the Central Bank said: "This bond issue is the first central government bond issue for fiscal 2012/2013 and is intended to assist in domestic liquidity management through the sterilisation of the bond proceeds at the Central Bank."
In its economic review, the Central Bank said: "Large net domestic fiscal injections, limited business investment opportunities and muted growth in private sector credit have fuelled a significant buildup of liquidity in the financial system."Commercial banks' excess reserve balances held at the Central Bank have reached a daily average of $5,961.9 million by March 19, 2013, after averaging $5.1 billion in February 2013," stated the economic review.
In explaining the purpose of the issue, the Central Bank said: "The issuance of this bond will reduce excess liquidity levels in the banking sector in accordance with established monetary policy, while the proceeds of the bond will be held in a frozen account at the Central Bank on behalf of the Government.