Lacklustre bonds omitted as gov’t debt hunt resumes

Reaching out:  Serame says talks are ongoing with the market over bonds PIC: MORERI SEJAKGOMO
Reaching out: Serame says talks are ongoing with the market over bonds PIC: MORERI SEJAKGOMO

Government, through the Bank of Botswana, returns to the capital market today (Friday) seeking P905 million in local debt, but this time no bonds will be offered to investors, BusinessWeek has established.

Bonds, which represent the longer maturing debt for government, have underperformed in all the auctions since the raising of the debt ceiling to P30 billion last September. Central bank officials and market analysts have noted poor uptake of the bonds by investors such as pension and insurance funds, which typically target the longer maturing debt.

While the BoB is not bound to offer bonds at each of its monthly auctions, which raise debt for the government, the absence of the longer maturing paper comes as the Finance and Economic Development ministry engages the market to resolve the dilemma over the bonds.

According to a BoB notice issued this week, today’s auction will feature three Treasury Bills with maturities ranging between three and 12 months. The shorter-term Treasury Bills have proved popular with investors, being highly subscribed for in all auctions since the increase of the debt ceiling and being responsible for much of the proceeds government has raised in its domestic debt programme.

Finance and Economic Development minister, Peggy Serame told BusinessWeek the low uptake was linked to investors’ perceptions that the yields on the bonds were low compared to peer markets in the region and local corporate issuers. She said government was working on several initiatives to boost uptake.

“Among the initiatives undertaken is to increase visibility of government securities through publishing of the annual issuance calendar, more frequent auctions, meeting with local fund managers and other potential investors,” she said. “Engagements are taking place between the ministry, the BoB and market participants in order to address impediments to increased bond issuance. “The other planned initiatives during the year cover reaching out to the general public through public education and information dissemination of the securities.”

Serame said a total of P4 billion is expected to be raised through bond and treasury bill issuance in the 2021-2022 fiscal year.

Kgori Capital managing director, Alphonse Ndzinge previously told BusinessWeek that the short-term side of the market was populated largely by the commercial banks given their needs for asset-liability management for a combination of regulatory and liquidity requirements.

“And then on the long-end, investors with longer-dated liabilities such as insurers with products like retirement annuities tend to participate more,” he said. “The interest in longer maturity notes really comes down to aligning pricing expectations between the issuer and investors which is partly a function of forward-looking risk/reward expectations of those instruments relative to other investment opportunities in the market.”

Editor's Comment
A Call For Government To Save Jobs

The minister further shared that from the 320 businesses that notified the Commissioner of Labour about their plans to retrench, 20 were acceded to, which resulted in 204 workers being retrenched during April 2020 and July 2021.The retrenchments were carried out while the SoE was in place, meaning the companies that succeeded must have had solid reasons, despite the strict SOE regulations imposed on businesses to not retrench. We are left with...

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