Thursday, January 17, 2013

Can You Trust the Bank of Sierra Leone's Bearer Bonds?

That, of course, is the first question any rational person would ask when reading FT Alphaville's "Once you turn base money into short-term debt, can you go back?".

I'd been lurking at Interfluidity on the Paul Krugman/Steve Randy Waldman debate/discussion that included the question of, as Ms Iz frames it "whether 'base money' and short-term debt are perfectly substitutable or not".

This got me thinking about currency that pays interest which leads naturally enough to The Bank of Sierra Leone, Sierra Leone's CB, which is just about the last government entity to issue debt in bearer form.

The most recent mention of these little beasties is:

TBB AUCTION RESULT
TBB being Treasury Bearer Bond. The report goes on to say:
RESULT OF TREASURY BONDS AUCTION HELD ON 14th December 2012
The Interest Rate that cleared the market for the Treasury Bonds issue of 14th December, 2012 maturing  13th December, 2013 was 20% per Annum. Customers who bided at Interest Rates 20% and below succeeded in the auction at a flat rate of 20%
The bank's half-year statement for Dec. 31, 2011 (most recent available) has only one reference to the bonds.

While the section titled:
Sierra Leone Government Securities
has four sentences:
Treasury Bearer Bonds
These are government securities introduced in 1993 with a 12 (twelve) month term to maturity. They are issued in the primary market at face value in monthly auctions. Since interest payments are made quarterly, four interest coupons are attached to the TBB certificates which are presented on maturity to the commercial banks for interest payment. Commercial banks and Discount House participate in the primary market as agents through which customers bid for Treasury Bearer Bonds.
Unlike the question posed in "Can you trust the First Bank of Nigeria?" where, as it turns out the answer is an unequivocal "yes" today's question must be held in abeyance.
Right now I can't even tell you the exchange rate for  Sierra Leonean Leones