The auction on February 23 saw bids worth P1.2 billion for a P400 million, three-month Treasury Bill (T-Bill) and bids worth P1.9 billion for the P450 million offered under the six-month T-Bill.
The three bonds on offer, with maturities ranging from 2029 to 2043, attracted more moderate bidding but were all equally oversubscribed.
Data compiled by Kgori Capital analysts indicates that yields continued to fall at the latest auction, easing the pressure on government’s borrowing costs. Yields fell by 34 basis points on the three-month T-Bill and by 32 basis points on the six-month T-Bill, while the reduction on the bonds was more moderate, averaging 18 basis points.
The government relies on the domestic debt programme to cover the projected P8.7 billion deficit for 2024–2025. The BoB, acting as government’s banker, conducts monthly auctions of short-term T-Bills as well as longer-term bonds to primary dealers who are exclusively banks. At the auctions, the dealers compete to lend to the government by offering the yields they are seeking, with the BoB deciding the 'stop-out' yield or the maximum interest level it is willing to pay the dealers on the particular securities on offer.
Parliament approved the doubling of government’s domestic debt programme to P30 billion in September 2020 to fund deficits arising from the pandemic and other budget needs. The latest trends of falling yields and full allotments mark a sharp turnaround from the prolonged period of under-allotment and rising yields that greeted the expanded debt programme in 2020.
Central bank officials have noted that liquidity has been rising in the local market, helped by changes to pension fund rules requiring them to retain more of their assets domestically. The publication of the government’s borrowing programme has also injected confidence into the capital market.
Meanwhile, the BoB is preparing to help the government raise capital via the issuance of green bonds. Finance Minister Peggy Serame, in her budget speech, mentioned that part of the funding for the 2024–2025 deficit would come from green bond issuance.
Central bank governor, Cornelius Dekop stated that the BoB was working on different types of bonds for issuance this year, such as inflation-linked notes, and expressed enthusiasm for green bonds. “We have different types of bonds lined up, and there are certain types we have been asked by the government to work on, like the inflation-linked bonds and others,” he said at a briefing last week. “We are certainly sold on the idea of green bonds and others. It should not only be the government looking at green bonds but state-owned entities and the private sector. "I’m happy that certain private entities such as Absa have those plans for green bonds, and so we are getting into that space as a country.” Absa Bank Botswana made history in January when it listed the Botswana Stock Exchange’s first sustainable bond, a P47.7 million note targeting green funding in the local economy.
