Bond holders of government, corporations and commercial banks are likely to make extended gains following the recent slash in the Bank Rate by the Bank of Botswana as the debt market have responded positively to the cut.
Since the beginning of the year, the Bank of Botswana (BOB) Monetary Policy Committee (MPC) cut its rate four times by 50 basis points (0.50 percent) each time in May, June, August and lately in mid this month. Overall, this reduced the Bank Rate to 7.5 percent from 9.5 percent since the previous rate cut in December 2010.
Available figures show that as at 13 December, the total bond market capitalisation was P9.3 billion in comparison to P8.5 billion in the same period in 2012. The Botswana Stock Exchange (BSE) Product Development Manager, Thapelo Tsheole said in 2013, the Bond indices continued to experience an upward trajectory reflecting the significant downward adjustment in yields following the four rate cuts.
“On a year to date basis the BBI has registered a return of 9.8 percent, whilst the CorpI and the GovI appreciated by 10.4 percent and 9.1 percent respectively. Both the BBI and the GovI returns outperformed the average inflation rate of 6.1 percent in 2013”.
Figures from the government statistics agency shows that the Consumer Price Index was 4.1 percent in November 2013, down from 4.8 percent recorded in October. Annual Inflation rate in November 2013 was lower than the 7.4 percent recorded during the same month in 2012.
The Botswana Stock Exchange figures shows that the total value of bonds traded in secondary market for the period ended 13 December 2013 amounted to P94.7 million, compared to P332.2 million in the same period in 2012.
Tsheole added that the Standard Chartered Bank SCBB005 bond was redeemed on 14 January 2013 while Stanbic Bank Botswana also redeemed two of their listed bonds: the SBBL046 which was called in June 2013 and SBBL049 redeemed on August 2013. DCPF003 matured on 2 June 2013. The government bond, BW009 (P433 million) matured on 11 September 2013.
Regarding the Botswana bond index constituents, Tsheole revealed that the new government bond, BW011, became eligible in the GovI when it was listed on the BSE, as per the BBIS Ground Rules on 29 October 2013. On 29 October 2013 BWO11 was listed while the domestic furniture retailer, Furnmart also had its bond; FML025 becoming a CorpI constituent upon listing at the beginning of this year.
