Business

Yields fall as gov't raises P1.4bn debt

Finger on the pulse: The BoB is both government's banker and also its principal economic advisor
 
Finger on the pulse: The BoB is both government's banker and also its principal economic advisor

The auction held on November 24 is the fourth in a row where the central bank has been able to raise the target amount of debt it has been seeking for government. The latest trend is a sharp turnaround from the prolonged period of under-allotment that greeted government’s decision to double its domestic debt programme to P30 billion in September 2020.

Figures from the latest auction show that government’s borrowing costs eased, as reflected by the stop-out yields published by the central bank. Data compiled by Kgori Capital indicates that yields tumbled across the two treasury bills and three bonds offered at the auction, by as much as 65 basis points. BoB figures show a trend of oversubscription for the notes on offer, with bids for the three-month treasury bill valued at P1.1 billion against the P300 million on offer.

Central bank officials previously said liquidity has been on the rise in the local market, helped along by changes to pension fund rules that require them to retain more of their assets domestically as opposed to offshore.

BoB’s financial markets department director, Lesego Moseki told journalists last month that from about P3.5 billion earlier this year, liquidity in the market was estimated at P10 billion. This, he said, had transmitted into an increase in the demand for government bonds. Kgori Capital chief investment officer, Tshegofatso Tlhong told the firm’s Global Multi-Asset End of Year Review Call on Monday that yields were declining in line with increasing demand.

She added that while there were expectations of higher liquidity in the short term, it was likely that most pension funds had already met the target of where they are required to be this year in terms of assets held locally.