BSE calls on treasury to issue more bonds
Staff Writer | Friday July 28, 2017 15:39
There are currently 43 bonds listed on the local bourse, from which only government has issued five. In a second quarter market update, the BSE said the absence of adequate government bonds as well as the wide gaps between their maturity dates have the potential to impact pricing of corporate bonds which ordinarily reference on government bonds as they are deemed risk free.
From the five listed government bonds, three of them are fairly medium to long-term dated while the two are maturing in 2018 and 2020.
“The limited number of government bonds is a great concern with respect to maintaining a robust risk free curve and the viability of the existing three BSE bond indices. These wide gaps in the yield curve negatively impact the pricing of assets such as corporate bonds that ordinarily reference risk free assets and this brings distortions in pricing and compromises the liquidity and the appetite for debt instruments,” said the BSE.
The market capitalisation of listed bonds increased to P12.4 billion in the first half of this year from P10.9 billion in the same period in 2016 on the back of new listings of both government and corporate bonds. In the quarterly update, the BSE said first half activity in the bond market has improved compared to the same period in 2016 with the value of bonds traded at P89.7 million in comparison to P59 million traded during the same period in 2016.
Bank of Botswana (BoB), on behalf of the government, held two bond auctions during the period under review.
At the June 2, 2017 government bond auction, during which P901 million was raised, four bonds were re-opened and a P500 million Treasury Bill was issued. On the corporate bonds side, there were four new corporate bonds issued during the first half of 2017. These were GetBuck’s GBL001 (P50 million) and GBL002 (P21.8 million) and two other bonds issued by Stanbic Bank Botswana limited being the SBBL066 (P140 million) and SBBL067 (P60 million).
Government raised about P4 billion from the bond market in 2016 through Treasury-Bills and tapping into existing issued bonds as treasury decided to entirely fund the forecast P6 billion budget deficit from domestic resources.
During the year 2016, BoB, on behalf of government, held four bond auctions in which it raised a total of P2 billion from Treasury Bills and another approximately P2 billion issued bonds.
In the 2016/17 financial year that ended in March, the government has projected a budget deficit of P6 billion which it will fund through the bond auction as well as drawing down on government Investment Account (GIA) at the BoB.