THE Government may borrow from the international capital market before it lands a new deal with the International Monetary Fund (IMF).

It commenced negotiations with the multilateral agency on Monday just ahead of a one-week tour of the US and the UK, led by Finance Minister Peter Phillips, aimed at marketing the Government’s plan to issue bonds.

But with no new budget or tax and pension reform measures to be presented before the end of May, it’s likely the Government will have to raise funds to repay a (euro)200- million bond in July and bolster its foreign currency reserves.

Jamaica Observer columnist Keith Collister noted that French bank BNP Paribas and Citigroup have a joint mandate to arrange up to US$500 million in new eurobond financing to do just that.

It may be too early to determine investor appetite for the new issue, but analysts agreed that the bond would be more expensive than loans from multilateral institutions.

“Jamaicans will mostly be the ones to take it up,” said Proven Wealth Limited’s CEO Chorvelle Johnson. “The appetite is here once the returns are good.”

She expects the new note will attract investors should it have a tenor (time to maturity) of seven to nine years and yields of eight to 8.5 per cent.

Sterling Asset Management managing director Charles Ross said that there hasn’t been a lot of trading of US-dollar or Jamaica-dollar fixed income paper, but he couldn’t peg how much participation there would be from local institutions.

He, too, believed it would be difficult for the Government to issue a bond with a yield lower than eight

per cent.

At present, the Jamaican global bond with the longest tenor matures in 2039. It is trading at a yield of 8.68

per cent.

Ross said that the Government may have to trade off longer maturity for lower yield. Either way, the market wouldn’t necessarily accept a long-term bond.

Another factor the Government has to consider is when its other bonds mature. It will need to avoid issuing a bond that becomes due in a year

when an existing large repayment becomes due.

US$750 million becomes due in 2019. Issuing a bond that becomes due before then may not be attractive to the Government and another principal repayment (US$250 million) doesn’t become due until 2022.

The delegation led by Dr Phillips, which includes Financial Secretary Wesley Hughes and Bank of Jamaica Governor Brian Wynter, will meet international fixed-income investors in Boston today, and in New York tomorrow and Friday. They meet investors in London on April 30.