The deputy Chief Executive at Botswana Stock Exchange Thapelo Tsheole has confirmed talks between the central bank and the local bourse which could result in government bonds being traded on the stock exchange alongside corporate bonds.
Tsheole said Monday that his organisation has kick started negotiations with Linah Mohohlo, the central bank governor, to have all the bonds traded from one central point, a trend which he said is trending in other stock exchanges globally.
“Worldwide, bond markets are being automated and the BSE is no exception,” Tsheole said Monday.
In 2011, Tsheole and his team at BSE wrote a paper that highlighted the need to promote efficiencies in the bond market by improving information dissemination, transparency in trading, price discovery and ultimately liquidity in the bond market.
“There still remains a strong inclination to maintain fragmented markets for government bonds and for corporate when there is an opportunities to leverage on the existing infrastructure (ATS and CSD) to increase efficiencies and develop the market.”
The BSE automated in 2012, but no bonds have been traded through the ATS since then. At the same time, market figures show that the Bond indices of the BSE continues to experience an upward trajectory reflecting the significant downward adjustment in yields following rate cuts by the central bank.
Given the trend, bond holders of government, corporations and commercial banks are likely to make extended gains following a series of slashes in the Bank Rate by the Bank of Botswana as the debt market continues to respond positively to the cut.
Since the beginning of 2013, 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-December. In September this year, the bank left its rate at 7.5 percent.
The BSE data shows that by December last year, 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.
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.
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. At the same time, the government bond, BW009 (P433 million) matured on 11 September 2013.