Government raised just P200 million of the P1 billion it was hoping to secure at a recent auction of bonds and treasury bills, as the central bank resisted the market’s push for higher yields.
The BoB, as government’s banker, conducts monthly auctions of treasury bills as well as bonds to primary dealers who are exclusively banks. At the auctions, the dealers compete to lend to the government by offering the yields they are seeking, with the BoB deciding the 'stop-out' yield or the level of interest it is willing to pay the dealers on particular securities on offer.
The Bank of Botswana (BoB) floated two treasury bills with maturities of three and six months, receiving bids of P1.05 billion on December 30.
Details provided by the central bank indicate that for the P500 million six month bill, just one bid out of six was successful, raising P50 million, while for the P500 million three month bill, two bids out of six were successful, raising P150 million.
Government’s borrowing costs were largely flat at the December auction, with the stop-out yield for the three month bill rising by five basis points from the November auction, while the stop out yield on the six month bill fell by nearly ten basis points.
Bidders at the auction raised their yield demands, with the highest bid received on the three month bill increasing by 33 basis points and that on the six month rising by 139 basis points.
Parliament doubled government domestic borrowing programme to P30 billion in September 2020, but since then the central bank has rarely met its debt targets as the interest rates demanded by the market have been higher than government is willing to pay.