Bond market grows by 300 percent
Isaac Pinielo | Tuesday December 2, 2014 14:54
Speaking at the Botswana Pensions Society conference in Gaborone yesterday, Botswana Stock Exchange (BSE) deputy chief executive officer, Thapelo Tsheole, noted that in 2010, the BSE together with market participants identified and documented several challenges impeding bond market development in Botswana.
Among the challenges identified were infrequent issuance of bonds by the government. “This is an issue taken up with government. We now have quarterly auctions although hardly any new bonds are issued, most are tap issuances,” he said.
Tsheole also mentioned lack of skills as another challenge that impedes bond market development. He pointed out that the BSE has been conducting fixed income courses since 2010.
“In 2014, five courses were held. On average, 15 people attended each course and the Investor Handbook was also published in 2014,” he said. He further indicated that they have put up strategies to improve liquidity. He said so far the Bond Market Association was conceived and steering committee set up, noting that the bond market strategy was also finalised and that the BSE has commenced implementation.
“In 2013 three bond indices were launched in April, Corpl, Govl and BBI. Botswana Bond Market Association (BBMA) was officially registered in September,” he said.
He revealed that the BSE is in discussions with the Bank of Botswana (BoB) about centralisation of bond trading and settlement in the Automated Trading System (ATS) and central securities depository (CSD). He also stated that the new BBMA committee was elected last Thursday and that revision of debt listing requirements has started.
The deputy CEO also indicated that worldwide, bond markets are being automated, adding that the BSE should be no exception.
“The paper we wrote in 2011 highlighted the need to promote efficiencies in the bond market by improving information dissemination, transparency in trading, price discovery and ultimately liquidity in the bond market,” he explained. He highlighted that centralisation of the bond market, at the exchange has become a key priority. He said that the BSE automated in 2012, but no bonds have been traded through the ATS since then.
He said there still remains strong inclination to maintain fragmented markets for government bonds and for corporate when there are opportunities to leverage on the existing infrastructure (ATS and CSD) to increase efficiencies and develop the market.
The number of government bonds issued grew from four in 2009 with a market capitalisation of P3.1 billion to six in 2014 with a market capitalisation of P6.5 billion.
Corporate bonds also grew from 28 in 2009 with a market capitalisation of P2.9 billion to 30 in 2014 with a market capitalisation of P3.3 billion. However, government bonds turnover dropped to P321.6 million in 2014 from P514.1 million in 2009.