(Limerick East) asked the Minister for Finance if his attention has been drawn to the fact that, even though it has long been the practice that smaller business in the primary market could be operated without difficulty at the official buy or sell prices as posted in the Stock Exchange by the Government broker, this no longer the case; the reason the practice has changed; and if he will make a statement on the matter.
Ceisteanna— Questions. Oral Answers. - Government Bond Market.
7.
My attention was drawn to the practice in existence up to mid-1987 — and which I assume the Deputy has in mind — whereby Government Stocks listed on the Stock Exchange for purchase only by the Government broker, namely, "bid" only stocks, could be nevertheless sold by the broker where the amounts sought of such stocks were small. These selective sales of "bid" only stocks, many of which had very high coupons, were discontinued at that time because the practice was considered to be inappropriate.
The position of small investments in Government stocks was re-examined recently however, in the wider context of an official report on the Government bond market generally. At this stage I can only advise the Deputy that I am at present considering all the recommendations made in this report.
(Limerick East): Would the Minister confirm that until relatively recently, dealers attempting major business, that is over £100,000, always had to submit their orders and offer prices above or below the official marked price but that it has long been the practice that small business could be executed without any difficulty at the official buy or sell prices as posted on the Stock Exchange? Would he further confirm that there has been a change in practice where at present business as small as £500 nominal is not available at the posted price and is subject to be marked down by the broker?
The Deputy will appreciate that from time to time differences will occur between the prices at which the market is willing to buy stocks and the prices at which the authorities are for tactical reasons prepared to sell. This is the position at present. In the long run, however, prices in the primary and secondary markets tend to converge in response to changing market conditions. The position of the small investor, and all other investors in Government bonds, must be viewed in the context of, among other things, official bond pricing policy, which is addressed in the bond market report. I cannot therefore prejudge the outcome as far as the small investor is concerned.
(Limerick East): Is the Minister aware that the official posted bid on offer prices are in most cases meaningless and yet they appear daily in the news media as well as in the Stock Exchange official list and that this gives rise to a false market, which is against the Stock Exchange rules and probably against EC rules also?
I think the Deputy will appreciate it is not the best exercise to try to pursue official pricing policy during supplementary questions because as far as the authorities are concerned, this is a tactical matter. Our business is to formulate the lowest rate possible. Thus what may suit the market at any given time may not necessarily suit the authorities or, conversely, what may suit the authorities at any given time may not necessarily suit the market. I am not prepared to go into the details of pricing the bond market in the House on supplementary questions.
(Limerick East): The Minister should make a statement because false information has been published. I am not asking the Minister to change it. I am simply asking him to explain what is happening.
The overall position has been reviewed by way of an official report. I am considering the contents of that report and the House will be given the benefit of a full, composite statement on the overall position in the near future.
(Limerick East): When can we expect to hear from the Minister again?
In the near future.