BoB to float new 25-year gov’t bond
Mbongeni Mguni | Monday October 20, 2025 06:00
The central bank, government’s agent in the local capital market, has generally missed its fundraising targets at each of the monthly auctions of government-backed treasury bills and bonds since July last year.
The auctions have been hit by tightening liquidity conditions in the local financial sector, whilst bidders, who are exclusively banks, have also raised the levels of the returns they want, in view of the sovereign credit downgrade and government’s uncertain fiscal outlook.
BoB senior dealer in the financial markets department, Boago Kebaitse, told the Bifm annual seminar this week that the new bond was due out in about two weeks and would tap into the needs expressed by the market.
“In a couple of weeks or so, we are going to issue a new 25-year bond and cater more to those investors who want to invest long-term,” he said on Tuesday. “It's a balancing act, and we are trying to make sure that we are able to get funds in the longer end and also be able to please those investors who are more interested in the shorter end.”
At present, the BoB has six government bonds outstanding with maturities ranging from 2027 to 2043. Much of the funds the central bank has been able to raise in recent months has been on the shorter end of the spectrum, involving the early-maturing treasury bills, a situation that suggests that at some point government pays off one debt with another, on a cyclical basis.
The yields or 'interest rates' on the treasury bills have been rising sharply this year, with the three-month note rising from 3.43 percent at the beginning of the year to 7.13 percent earlier this month.
“We would rather have as much money as we can in the longer end as opposed to the shorter end, but unfortunately, given the current market conditions, we are forced to accept more bids in the shorter end and in the belly of the curve. “But even then, we still do touch base with the market and try to follow where demand conditions are. “We are increasingly in a position where we have to listen to the market in terms of pricing and also in terms of preference,” said Kebaitse.
Bifm investment analyst for fixed income, Mbaki Mudlovu, said the capital market was eagerly awaiting the new bond issuance from the central bank.
“I can definitely confirm that, representing the asset manager side and also looking at some of our clients being liability funds or liability-driven mandates, there is quite a lot of excitement around this new 25-year bond because it essentially helps liability books better manage their liabilities. “It’s a welcome development,” he said.
According to the BoB’s calendar, the next auction of government T-Bills and bonds is due on October 31 and will see the debut of the 25-year note.
Prominent economist, Keith Jefferis, said government had only been able to raise about P2 billion of the estimated P5 billion it intended to raise in the capital market in the first half of the year, a sign that borrowing conditions were difficult.
He said this situation and the fact that interest rates have been creeping up on government’s borrowing meant that spending cuts were essential.
“Government has to do fiscal adjustment measures or the famous fiscal consolidation, which is just code for reducing the budget deficit. “This is absolutely essential because fiscal consolidation is needed to slow down the increase in public debt and to slow down the depletion of the foreign exchange reserves,” he said.
Government’s budget plans for the balance of the financial year are expected to become clearer when Vice President Ndaba Gaolathe presents the inaugural mid-term budget review statement soon.