Govt raises P879m from capital market

MBONGENI MGUNI
Staff Writer | Tuesday March 12, 2013 00:00

 

The government's agent in the capital markets, Bank of Botswana floated three and six month Treasury Bills valued at P680 million and a 15-year bond valued at P200 million with an eight percent coupon. According to auction results published yesterday, of the 52 bids received for the two T-Bills, only 34 were successful. For the three-month bill, the Bank of Botswana (BoB) fixed the stop out yield at 5.38 percent, meaning all bids above this were rejected.

The stop out yield on the three month T-Bill has been rising since it debuted last September, increasing from 5.04 percent to 5.14 percent in December and 5.38 percent last Friday. The rising yields support the data showing lower bidding pressure and point to higher borrowing costs for government.The BoB affixed a 5.01 percent stop out yield on the six-month bill declining from the 5.06 percent it was pegged at, at its last auction in September. Bids for the six-month note ranged between 4.55 and six percent.

Trends in the auction of the 15-year bond were particularly aggressive with only six bids out of 35 being successful. The eight percent coupon note carried a stop out yield of seven percent while bids ranged from 6.9 to 7.9 percent.In terms of the bid to cover ratio, the most aggressive bidding and demand at last Friday's auction was for the P200 million bond. It attracted bids worth P837 million to give a bid to cover ratio of 4.2 percent.The bid to cover ratio for the three month T-Bill was 1:3 while the six-month note was 1:4, reflecting the wide bid-ask spread in the auction and comparatively poorer demand for the shorter-term notes.

The bid to cover ratio is an indicator of the strength or demand for securities and a ratio of 2:0 generally indicates a successful auction with aggressive bids. Lower ratios are regarded as an indication of a disappointing auction.Government, through the BoB, usually goes to the capital market twice a year in March and September, seeking funding for budget support but also to support development of the local market.Last September, however, the BoB introduced the three-month T-Bill pointing to its desire to better monitor short-term trends in the market.