The Bank of Botswana (BoB) raised P2.63 billion in an auction of treasury bills and bonds last week, narrowly beating its P2.6 billion debt target for the government, a rare feat given the generally tighter fundraising conditions.
The central bank’s achievement came at a cost as yields rose across the spectrum of notes on offer, rising by as much as 152 basis points, according to Kgori Capital calculations.
The auction on February 27 saw the 2043 bond being over-allotted at P251 million, against the P200 million on offer, whilst the other bond, the 2035, raised P81 million against the P200 million on offer.
The three-month treasury bill, the shortest maturing paper on offer at the auction, was over-allotted at P1.5 billion against the P1 billion on offer. The result is worrying for government as it continues a trend in recent debt bids by the central bank, where more funding has been raised at the shorter end of the spectrum, necessitating the frequent rolling over of debt, rather than the long end, which would give government flexibility over its debt finance management.
The six-month treasury bill raised P602 million against the P1 billion on offer.
Analysts have noted a steep rise in government’s debt costs at the monthly auctions, as bidders factor in last year’s sovereign credit ratings downgrades, as well as the uncertain public finance outlook. The BoB has attempted to engage the capital market on the debt costs, but the continuing trends suggest little has been achieved.
At the last auction, bidders raised their demands to as much as 28% for the 2043 bond and 24% for the 2035 bond, from 22% and 21%, respectively, at the prior auction, where the two bonds were offered together.
