NPF buys new $60m Gov’t bond

SINPF Building in Honiara
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THE Solomon Islands National Provident Board has purchased a new $60 million bond issued by the Government on Tuesday, December 22, 2020 within the framework of an emerging secondary market for government debts.

The Central Bank of Solomon Islands (CBSI) has commenced what initially can be seen as the beginnings of a secondary market for government debts, where holders of government debts can sell their assets to Central Bank of Solomon Islands.

The CBSI has also approached other SIG debt holders.

The purchase immediately followed the sale of the Fund’s recently purchased covid19 $60M Development Bond to the Central Bank of Solomon Islands (CBSI) on December 21, 2020.  The Bond that was sold to the CBSI was purchased by the SINPF Board in June 2020.

The $60 million proceeds from the sale of the bond were used to purchase the new bond.

Prior to the sale, the SINPF Board received its $1.5 million six months interest on December 21, 2020, before selling.

The new negotiated 10-year bond was issued by the government on the same terms and conditions as the previous bond:

  1. face value of $60 million;
  2. coupon rate of five percent pa;
  3. grace period of three years where interest only of $1.5M to be paid after every six months; and
  4. amortised principal and interest of $ 5,786,714.29 to be paid half yearly following the three years grace period.

The Fund’s current investment exposure to Government remains at $210 million representing just under six percent of the Fund’s investments portfolio.

The Board has an upper limit of 15 percent with a 10 percent target for government investments.

The new bond ensures that the Fund continues to receive an attractive annual five percent interest income as previously enjoyed by members of the Fund under the earlier bond, whilst the government will use the proceeds of the bond to finance its key priorities to keep the country’s economic engine going.