Thursday, April 25, 2024

Debt market buoyed by yield seeking investors

It might be a slow growth, but Botswana’s bond market has shown signs of upward movement as government continues to issue debt under its multibillion Pula program, in a bid to raise cash locally from a market in which investors are chasing better yields while asset managers are looking to diversify portfolios.

Botswana Stock Exchange (BSE) Deputy Chief Executive Officer, Thapelo Tsheole said on Friday the total value of bonds traded for the period ended 17 June 2014 amounted to P354.9 million compared to P42.3 million over the same period in 2013 with activity skewed towards treasury activity.

“The trades were on account of government bonds as was the case in 2013. There was no liquidity in corporate bonds,” Tsheole revealed.

Bank of Botswana auctioned P150 million of BW011 on March, 7 2014, of which P149 million was allotted and additionally, a P340 million six month Treasury Bill was issued with the T-Bill oversubscribed by 2.6 times and fully allotted.

“The bond was 1.9 times oversubscribed indicating increased demand for long term paper given the supply at the time of the auction,” he added.

Government also raised an amount of P558 million in a June, 6, 2014 auction comprising a six month Treasury Bill (P340 million) and three bonds comprising of BW008 (P25 million), BW010 (P100 million) and BW011 (P93 million). All securities were oversubscribed.

“As at 17 June the BSE’s debt market capitalization was P9.6 billion, compared to P8.3 billion as at the same date in 2013,” said Tsheole.

According to analysis of the performance of the BSE bond indices between 1 January 2013 and 17 June 2014, the BBI registered a return of 12.7 percent, whilst the GovI and the CorpI appreciated by 13.2 percent and 12.1 percent respectively. There is a P15 billion government bonds issuance program in place, with only P6.7 billion issued as at the end of 2013. BoB said last month that government’s and treasury guaranteed debt at the end of 2013/14 is projected at P30.9 billion of which P23.4 billion is accounted for directly by the government’s own debt. The total debt is equivalent of 24.3 percent of the forecast GDP–but still in the statutory ceiling of 40 percent.

“The P15 billion Government Bond Program has remained in place and affords an opportunity for development of the capital market, while providing an alternative source of government funding,” said BoB.

The government has increased borrowing from the domestic debt market in the past year and as a result, outstanding government securities increased from P6 billion at the end of 2012 to P6.7
billion in December 2013.

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