Activity in the traditionally quiet secondary bond market has ballooned this year, with the Botswana Stock Exchange noting a 66.7% increase in trades to P5 billion in the year to October 31, compared to the same period last year.
Bonds are financial instruments issued by government and corporates to borrow money from the market. Secondary market trades involve sales of bonds by those who bought the bonds at their original floating by issuers such as governments and corporates.
In a recent update covering the period between January and October 31, the BSE noted that the majority of bond market trades were associated with government bonds, which generated P4.9 billion in trades, with the balance involving corporate bonds. The sole sustainable bond on the BSE, listed by Absa Bank Botswana last year, recorded trades worth P4.5 million over the reporting period.
Analysts believe the higher trades are associated with the activities of asset managers who are hunting for investable opportunities, as the repatriation of pension fund assets creates greater liquidity in the market. Under legislative changes, pension funds have until December 2027 to increase their domestic holdings to a minimum of 50%, from the current 30%.
According to the BSE’s figures, total bond market capitalisation was measured at P36.7 billion at the end of October, up by 34% when compared to the corresponding point in 2023. The difference has largely been the higher bond issuance by government, which increased its domestic note programme from P30 billion to P55 billion in February this year.
Government has been more aggressively floating notes in the local capital market, as mineral revenues have declined, whilst spending pressures have remained at elevated levels. According to BSE data, the market capitalisation of government bonds was measured at P30.9 billion as at October 31, compared to P22.3 billion at the same time last year.
Corporate bonds have also increased in terms of number of notes listed, which rose to 96 from 68 last year, whilst trades in corporate bonds more than doubled over the period to P181 million.
