Earlier on, we showed you our interview with Financial Secretary, Joseph Waight. We also asked him about the idea from financial advisor, Ervin Perez, to lessen the taxpayer's burden on domestic debt.
The Managing Director of Legacy Fund thinks that if the Government lowers the rates on the Treasury Notes and Treasury Bills - it will also drive down interest rates - while making public debt cheaper. But the Financial Secretary isn't so sure that the Banks will want to by in. He told us that it's all about demand, and if the banks profit margins are decreased, they will not want to buy in on the Government's Treasury Bills:
Joseph Waight, Financial Secretary
"Whether the government can borrow cheaper it depends on the market, it depends on the demand. We don't have many takers at 7%. People don't want to tie up their money for that long even at those attractive interest rates. They would prefer shorter term maturity, because a bank would not want to tie up its money for that period of time and private investors don't have the kind of money that the government is borrowing. The government had borrowed 200 million dollars the other day. So mostly it's the banks that are in the game."
"Whether those rates can go down a bit, well we price at what they call a yield curve. That is the maturity is one year, two year, five year, ten year - interest rates around 3%, 3.5%, 7% - those are coming down historically. But we can have to do it gradually and the problem is if we were to offer let say a 1 year bond at 2%, I am not sure there will be any takers. We can try it, but I don't think so. The demands is it's a limited market. Only a few people have that kind of money to go in the system. I am not sure. Mr. Perez, it's something that we can consider, but I am not sure that's it's as easy as they make it out to be and we don't think that there will be much takers at that rate."
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