The Government of Botswana has ended its P5 billion (US$722 million) bond issuance programme with an oversubscribed auction by the Bank of Botswana (www.bankofbotswana.bw) last Friday, 5 March, according to a report in Mmegi newspaper (www.mmegi.bw). The fundraising programme started in 2008 and raises funds for Government investment in large development projects under the National Develolpment Plan (NDP 10).
The central bank auctions Government bonds and treasury bills every six months, in March and September, and the auctions are open to members of the public.
The auction was the first time to launch a new, longer-dated 15-year-bond, providing the much needed benchmark for long-term borrowings. This was reportedly under allotted, with only P195 million of the P700 million on offer being allotted, despite total bids received being P 824 million. This may indicate that the market was demanding a heavier yield than Government was willing to pay.
According to the news report, there was overall oversubscription. The 6-month treasury bill fully allotted at P800 million and oversubscribed by P400 million. The 2-year bond was fully allotted at P200 million against P301 million of total bids received, the 51/2 years was slightly under-allotted, with P192 million of the intended BWP200 million being allotted.
The paper quotes Olebile Makhupe, Head of Global Markets at Standard Chartered Bank: “We have recently observed a shift in the Botswana yield curve with long-term yields picking up, reflecting expectation of higher rates in the future. In addition, long-dated asset yields have in the past reflected excessive demand rather than appropriate pricing for risk or where investors expect rates to be in the future”, she said.
Makhupe added that this trend seems to be changing, as availability of long dated assets has improved in the past few years.
“However, more work can still be done to create a platform for investors to liquidate their bond holdings when they need cash, rather than having to wait for the investment to mature, allowing for what is called secondary market trading,” she said.
According to today’s market report of the Botswana Stock Exchange (www.bse.co.bw), 10 Government bonds and 22 corporate bonds are listed, but trading does not seem very active.