Bermuda's first foray into the international bond market has already inspired some debate and controversy.

For some, the fact that the $500 million bond was oversubscribed five times over has been hailed as a vote of confidence in Bermuda's economy.

For others, that same success means that the bond could have been sold for a lower "coupon" or interest rate, thus reducing the burden on Bermuda's taxpayers.

In principle, the bond issue, which carries a fixed annual rate of 5.65 percent, is a sensible way of paying off existing short term indebtedness at a rate which may turn out to be beneficial if interest rates rise from their current historic lows.

To be sure, the fact that this is the first time Bermuda has offered a bond has to be factored in. This will, as underwriter HSBC noted, add a premium to the bond. And the fact that Bermuda's economy is almost entirely dependent on one sector – international business – also adds to the risk.

Against that, Bermuda's still high debt ratings and generally solid finances (although they are not nearly as stable as they were just a few years ago) should have reduced the risk level that investors were being asked to take on.

The fact that the bond issue was so heavily over-subscribed strongly suggests that it was over-priced. It is reasonable to assume that if it had been priced marginally lower, it would still have been fully subscribed, and the taxpayer would have had been asked to pay less in interest.

Leaving that aside, there is a matter of greater concern. The first is that an unspecified amount, but likely to be around $150 million, of this bond is being used for new capital development and is new borrowing in the current financial year. This may well be required but it begs the question of what Government's plans are to reduce the Island's record indebtedness.

It has also been noted that Bermuda is borrowing more now, just as much of the rest of the world is trying to pay down its debt as quickly as it can.

It is true that Bermuda's recession is likely to continue this year, and on that basis, cutting off spending could slow down the possibility of economic recovery and exacerbate an already poor economic situation.

But increased borrowing now simply means storing up more pain for later, and this is why great care needs to be taken.

What Bermuda needs to know is how Government plans to reduce the Island's record indebtedness.

Increased revenue and cuts need not, perhaps, be made this year, but it is worrying that Government has not laid out what its long term plans for revenue raising and spending cuts are.

Two other points need to be made.

While there was little Bermuda could do to prevent a global recession, the Island was in poor shape to deal with its ramifications. Government spent when it should have saved and now must borrow in order to spend.

Government also allowed the economy to overheat in 2007 and 2008, when real estate prices in particular soared, encouraging the current glut of office space.

Had Government issued a bond then, and made it available to local investors, it would have soaked up a great deal of the excess liquidity in the economy, cooled the economy and allowed Bermuda to have a much softer landing than it has as a result.

The same mistake has just been made. Apparently, ten percent of the bond was taken up in Bermuda, but it was never offered to private investors; as a result, the chance for many Bermudians to invest in their own Country has been lost. Instead, they are likely to look abroad for better returns.