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Scramble as gov't raises P1bn in borrowings

Government raised P1 billion through the recent auction of three bonds and a treasury bill, with commercial banks, who hold exclusive bidding rights, stampeding for the risk-free investment.

The June 1 auction was the government’s second appearance in the bond market this year, after the March auction which raised P497 million out of the P1 billion in treasury bills and bonds on offer.

Each quarter, the Bank of Botswana (BoB) holds auctions of bonds and six-month treasury bills on behalf of government under the P15 billion note issuance programme which dates back to February 2011.

While the funds raised at the auctions are generally used to develop and support the local capital market, government also directs them to budgetary support as part of its domestic borrowings.

The P1 billion raised at the most recent auction is the highest since March 2017. Figures from the June 1 auction indicate strong demand for the government papers on offer, with the six-month treasury bill attracting bids valued at P750 million for the P500 million on offer. Yields on the T-Bill rose to 1.51% from 1.46% at the March auction.

Bond BW011 attracted 10 bids, with offers valued at P336 million for the P200 million on offer. Yields were marginally higher, being pegged at 4.85% at the June 1 auction, from 4.8% at the March auction.

Bond BW012 attracted eight bids,

with offers valued at P300 million for the P200 million, while the yield slid to 5.07% from 5.16% in the December 2017 auction. Bond BW013 attracted nine bids, with offers valued at P350 million for the P250 million on offer. Yields for the bond were higher at 3.86% from 3.76% in March. At the March auction, Bond BW013 offered P200 million, had no successful takers out of the 14 bids made.

The latest auction comes as the BoB urges government to increase its participation in the capital market.

At present, government has tapped into approximately P10.2 billion of the P15 billion note issuance programme.

“The Bank believes more borrowings by government and others could contribute to beneficial use of excess liquidity and market development,” Daniel Loeto, the central bank’s head of accounting told journalists last Friday.

“We are the lowest interest rates and besides that, borrowing locally does not carry foreign currency risks.”

In February, Finance Minister, Kenneth Matambo projected a deficit for the 2018/19 budget of P3.59 billion, which he said would be funded through “a combination of drawing down on existing loans, as well as on government cash balances”, which are held at BoB.




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