Govt completes P5B bond programme

| Monday March 8, 2010 00:00

 

The bonds were unique as it marked the maiden issuance of a new, longer dated 15-year-bond, providing the much needed benchmark for long term borrowings. Bank of Botswana auctions government bonds and treasury bills every six months, in March and September, and the auctions are open to members of the public.The results of the auction indicated an oversubscription on all the bonds with the 6 month treasury bill fully allotted at P 800 million and oversubscribed by P 400 million.

The 2 year bond was fully allotted at P 200 million against P 301 million of total bids received, the  5 1/2 years was slightly under allotted, with P 192 million of the intended BWP 200 million being allotted, while the maiden 15 year bond was heavily under allotted, with only P 195 million of the P 700 million on offer being allotted, despite total bids received being P 824 million.

An oversubscription demonstrates excessive demand against limited supply. It is worth noting that the 15-year-bond was not fully allotted, indicating bid prices may have been  higher than what the issuer was prepared to charge for the bond. 

Commenting on the results of the auction, Olebile Makhupe, Head of Global Markets at Standard Chartered Bank said ' we have recently observed a shift in the Botswana yield curve with long term yields picking up, reflecting expectation of higher rates in the future. 'In addition, long dated asset yields have in the past reflected excessive demand rather than appropriate pricing for risk or where investors expect rates to be in the future', she said.

Makhupe added that this trend seems to be changing, as availability of long dated assets has improved in the past few years.

'However, more work can still be done to create a platform for investors to liquidate their bond holdings when they need cash, rather than having to wait for the investment to mature, allowing for what is called secondary market trading,' she said .

The bonds is part of a 2008 bond issuance programme that was designed to boost capital market activities, reduce the cost of the Bank of Botswana Certificates, and facilitate planning for Government's investment in large-scale development projects under NDP 10.