Government is today set to try to raise up to half-a-billion dollars in a sale of 10-year bonds.

According to an explanatory note sent out to some financial institutions yesterday, Government intends to raise between $400 million and $500 million today.

It intends to spend the proceeds on repaying its revolving credit facility and short-term debt with local banks, and to fund capital expenditure.

It is understood that Government has told investors its short-term indebtedness with local banks totals $140 million. Last month, the Finance Ministry announced it had established a $200 million revolving credit facility.

Buyers of the bonds are likely to be large institutions, such as insurance companies and pension funds, seeking attractive returns from fixed-income investments.

The note explains that the bonds will be "fixed bullet" bonds, usually taken to mean that the interest rate paid on the bonds will be at a fixed rate and that the entire amount of principal will be paid back at the maturity date, which will be in 2020.

According to the note, the interest rate the Government will pay will be approximately 262 basis points (2.62 percentage points) above the rate for a US Treasury Bill. Yesterday, the yield on a 10-year Treasury bill yield fell to 3.05 percent, according to Bloomberg.

The Island currently has a Aa2 rating and a stable outlook with the Moody's credit rating agency. Fitch rates Bermuda AA+ (stable) and Standard & Poor's give Bermuda a AA rating, with a negative outlook.

The bond sale comes as Government grapples with a mounting total debt outstanding, of $826 million as of March 31, 2010, and comes after an international "non-deal roadshow" to try to attract buyers for the bonds.

The bonds are expected to list on the Bermuda Stock Exchange and the Euro MTF Market on the Luxembourg Stock Exchange.

The bonds will be sold in $100,000 blocks, which will limit the potential buyers to institutions and high net worth individuals.

Financial Secretary Donald Scott said yesterday that offering rules prevented him making any comment on the bond issuance. HSBC had no comment on the issuance.

The roadshow reportedly saw a Bermuda delegation headed by Mr. Scott travel to Hong Kong, Singapore, London, Los Angeles, New York and Boston two months ago. A meeting was also held in Hamilton.

Others who accompanied Mr. Scott were Assistant Financial Secretary (Economics & Finance) Anthony Manders, director of budget Tina Tucker and economic adviser Hasan Durham.