Stampede as gov't raises P1.1bn on bond market
Mbongeni Mguni | Friday September 14, 2018 12:38
Each quarter, the Bank of Botswana (BoB) holds auctions of bonds and six-month treasury bills on behalf of government under the P15 billion note issuance programme which dates back to February 2011. The auctions are limited to commercial banks, who hold exclusive bidding rights.
The August 31 auction was marked by intense bidding, due largely to the debut of two new longer-term bonds collectively offering P700 million, with maturing ranging from 2029 to 2043. According to notes on the auction results, the bond maturing in 2043 attracted bids worth P411million for the P300 million on offer. The BoB eventually allotted P301 million at a yield of 5.2 percent, the highest in the market for government paper. The 2029 bond offering P400 million, had offers equaling the amount on offer but only P129 million was allotted at a yield of 4.76%.
Bond BW013, first introduced in December 2017, offered P300 million at the latest auction and received bids worth P545 million. The bond was fully allotted with a yield of 3.89%. The BoB also auctioned off a six-month treasury bill which attracted bids worth P620 million, with an eventual allocation of P320 million at a yield of 1.55%. The strong interest in the latest auction mirrors positive sentiment from the market, particularly around the introduction of the new longer maturity bonds.
Botswana Insurance Holdings Limited (BIHL) group CEO, Catherine Lesetedi said longer term notes were key to the financial service’s giant matching its annuities business. BIHL is the country’s largest diversified financial services group, with assets of P16.3 billion.
“We managed our annuity risk well during the six months (to June 30, 2018) and I would be remiss if I did not say that managing that requires longer dated assets,” she told analysts at a results briefing recently.
“Government has come forward to the market with longer bonds like the 25-year one in September.
“We appreciate government for that and we continue to engage with the Finance Ministry for them to appreciate the challenge of matching the annuity book.”
The Botswana Bond Market Association has said the introduction of new paper, particularly with longer maturities, is key to deepening the bond market.
“We are also excited that this is the second time that a 25-year bond is issued, and this inherently continues to extend the yield curve and provide the necessary assets for long term savers,” the Association’s secretary general, Kopano Bolokwe told BusinessWeek.