Government will, at the end of the month, approach the market for P1.5 billion in borrowings via the offer of three bonds and a treasury bill, the highest amount fiscal authorities have sought since March 2012.
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. The auctions are limited to commercial banks, who hold exclusive bidding rights.
While the funds raised at the auctions are generally used for government budgetary support, the note issuance programme is also designed to develop and support the local capital market.
In June, the BoB raised P1 billion for government through the auction, while in March, P497 million was raised. In February, Finance Minister, Kenneth Matambo projected a P3.6 billion deficit for the 2018/19 financial year, which he said would be funded through domestic borrowing and drawing down on government’s own reserves.
According to documents made available, the upcoming August 31 auction will feature two new bonds, the first since Bond BW13 appeared in the December 2017 auction.
The August 31 auction will offer P300 million under BW13 at a coupon of 4.5% and a maturity of June 7, 2023, while the two new bonds will offer P400 million at a coupon of 4.8% and P300 million at a coupon of 5.3%. The P400 million bond matures on September 5, 2029 while the P300 million bond matures on September 5, 2043.
On Wednesday, Kopano Bolokwe,
secretary general of the Botswana Bond Market Association described the upcoming auction as “crucial and exciting” noting the debut of the two new bonds and the amounts they offered.
“Also, the amount on offer for each bond is quite significant compared to the P250 million that was on offer with respect to the BW013 last year. “Notably, it’s a welcome development that adds to the various facets of deepening of the bond market.”
Bolokwe added: “We are also excited that this is the second time that a 25-year bond is issued, and this inherently continues to extend the yield curve and provide the necessary assets for long term savers.
“Progressively, we hope to engage the government and the BoB as the Association to lobby for further deepening and frequent issuances as well as the diversity of issuances, such as issuances of Retail Savings Bonds and Infrastructure Bonds”.
The central bank recently revealed to BusinessWeek that it was in the process of finalising retail bonds, whose denomination would be bespoke to lower tier retail savers.
“The Bank of Botswana is indeed considering the introduction of retail bonds as a component of the existing P15 billion bond programme, administered by the Bank of behalf of government, and currently offered at wholesale level,” the BoB told BusinessWeek.
“In addition to contributing to enhancing the benefits of the programme, the retail bonds would support financial inclusion through access to secure, low-denomination savings product offering an attractive return.”