Finance Minister the Hon. David Saul said yesterday.

Dr. Saul said his Ministry was also considering writing a White Paper on the deregulation of exchange controls for presentation to the House of Assembly.

He said talks were taking place between the Ministry, the Bermuda Monetary Authority and the Island's three banks on the bond issues, which would be used to help finance Government capital projects.

"We are moving along on it and we are holding discussions on the rates of payment and so on with the banks and the Monetary Authority,'' he said.

"I expect we will do it toward the end of the summer.'' The bond, first announced in the February Budget Statement, is expected to receive the backing of the Opposition and is supported by the business community, which sees it as a way of conserving foreign exchange on the Island.

BMA general manager Mr. Malcolm Williams said no decisions on the term of the bond or the interest rate had been decided yet. Talks were focusing on how to make it attractive to local investors and how to blend it in with other investments.

He said the Bermuda dollar bond would probably be marketed to the general public and to financial institutions such as banks, deposit companies and insurance companies, but not to foreign investors.

"We want to get it appropriate and right,'' he said. "We are progressing and we have various options to discuss.

"We want to make it attractive and we do not want to undermine existing instruments.'' He said Government and the Monetary Authority needed to look at other financial regulations such as interest rates, foreign exchange and the structure of the Bermuda Stock Exchange while discussing the bond.

Dr. Saul and Mr. Williams both said deregulation of interest rates and foreign exchange would take longer and Dr. Saul said Government was considering issuing a White Paper on the subject for discussion by the House of Assembly and the public.

Both issues are considerably more contentious than the bond. The Opposition is opposed to deregulation and the business community is divided, with opponents warning it could lead to increased pressure on mortgage holders and capital flight.

Proponents say liberalisation, handled carefully, would reduce Bermudians' traditional heavy investment in real estate and provide capital for other forms of business.

Relaxation of overseas investment restrictions would also allow Bermudians to gain greater returns on their money which would the be brought back to Bermuda.

Dr. Saul has said he envisions a three-step process of deregulation, starting with relaxation of the seven percent ceiling on interest rates within a fixed band, then lowering the 10 percent tax on overseas investments and finally, relaxation of the $25,000 cap on the annual investment allowance.

"We have to do something,'' Dr. Saul said. "Obviously we cannot go the Big Bang route, but we need to do some deregulation on interest rates while being sensitive to mortgages and the general economy.''