Govt borrows P340m from capital market

MBONGENI MGUNI
Staff Writer | Tuesday June 11, 2013 00:00

 

According to available data, the treasury bill (T-bill) was heavily subscribed, attracting bids of P756 million against the P340 million on offer. The Bank of Botswana, government's agent in the debt programme, accepted 20 of the 30 bids made fixing the stop out yield at 5.05 percent.The stop-out yield represents the lowest price at which a treasury bill is sold at, or the highest yield the Bank of Botswana (BoB) was willing to give auction participants.

Trend analysis of the most recent treasury bill auctions indicates that last Friday's stop-out yield is generally within the range of yields seen in auctions of six-month treasury bills in the last 18 months.Stop out yields on the four six-month T-Bills auctioned since March last year have ranged between 5.01 percent and 5.06 percent.By contrast, stop out yields on the three-month T-Bill, which was introduced last September, have increased from 5.04 to 5.38 percent at the last auction in March this year.Bid to cover ratios, which compare the number of bids received to the number of bids accepted to gauge the success of an auction, have been well above 2:1 in auctions of the six month T-Bills in the last 18 months.

Last Friday's auction had a ratio of 2.2:1, compared well to 2:1 last September but was below the 2.9: 1 measured last March. Bid to cover ratios of 2:1 generally indicate a successful auction comprising aggressive bids.The latest auction is the first in the 2013/14 financial year and continues government's fund raising activities in the capital market, albeit at a lower rate of intensity when compared to the years during and immediately after the recession.

The finance ministry, however, has stressed that its forays into the capital market are less about boosting treasury and more about developing the sector to help 'the private sector become the engine of economic growth'.'Government continues to develop initiatives such as issuance of more treasury bills and government bonds to promote growth of the capital market and reduce reliance on Bank of Botswana Certificates,' finance and development planning minister, Kenneth Matambo said earlier in this year's budget statement.

Indicative of this, the BoB introduced the three-month T-Bill last year and cut back on bond issuance, with market analysts speculating that government wished to monitor market trends more closely through shorter term paper.BoB officials dismissed speculation that the shorter term notes and reduction in bond issuance was related to the overall health of public coffers. This year, government has projected a small budget surplus of P779 million, buoyed by customs and excise revenues as well as earnings from minerals.