Gov’t fully allots P4 billion
In the latest bond auction result report dated May 24, 2024, the stop-out yields for treasury bills held steady, maintaining their previous levels. However, the performance of longer-dated government bonds was varied, with one closing positively and two negatively. This comes in the wake of the government’s successful full allotment of P4.0 billion on the local capital markets.
According to an analysis shared by Kgori Capital, yields for the 3-month and 6-month Treasury bills remained unchanged, standing at 2.523% and 2.617% respectively. In contrast, for longer durations, the yields for the 5-year and 11-year government bonds experienced a decrease, whereas the yield for the 16-year bond saw a marginal increase.
Kgori Capital’s analysis revealed notable shifts in the longer-dated bonds, with the 5-year bond decreasing by 55 basis points to close at 6.050% (previously 6.600%), and the 11-year bond experiencing a substantial decline of 110 basis points, closing at 6.800% (previously 7.900%). Conversely, the 16-year bond exhibited an upward trend, increasing by 56 basis points to clear at 8.750%, up from 8.190% recorded in the previous auction.
The government, facilitated by the Bank of Botswana (BoB), successfully raised P4 billion from this auction. P1.2 billion was raised through both the 3-month and 6-month Treasury bills each. P1 billion was garnered from both the 5-year and 11-year bonds, demonstrating investor confidence across these maturity periods. Additionally, P600 million was allotted through the 16-year bond.
In the inaugural bond auction of the financial year, the Bank of Botswana (BoB) successfully raised P3.5 billion from the market, marking a significant step in meeting the government’s financing requirements, which are reliant on local borrowing. With the government’s net borrowing forecast pegged at P13 billion (compared to average of P3 billion), there’s a strategic initiative underway to partially replenish the Government Investment Account (GIA) by focusing on local bonds for funding needs.
Foreign exchange reserves increased by 6.8% from P60.5 billion in January 2023 to P64.6 billion in January 2024, and translated to 8.7 months of import cover of goods and services, according to the Financial Stability Report for May 2024. In foreign currency terms, the report shows that the reserves are estimated to have increased by 2.1% from US$4.7 billion to US$D4.8 billion and by 2.9% from SDR3.5 billion to SDR3.6 billion.
“The external buffers are expected to continue a recovery path owing to fiscal consolidation efforts as government plans to compress the import bill and the anticipated recovery in market conditions,” Financial Report Stability Report noted.
The budget for the note programme has once more been raised this year, going from P30 billion to P55 billion, alongside a rise in the minimum requirement for domestic pension fund participation. With a lot of liquidity coming into Botswana in line with new pensions’ regulation, the market saw yields decline in the fixed income space.
“Looking at the structure of liquidity, we view it as transitory and we should start to see it start to dissipate in the next 12, 18 to 24 months as these pension funds start to be deployed in asset classes they are supposed to be deployed in,” Tshegofatso Tlhong, the Chief Investment Officer at Kgori Capital said recently during a webinar.
Yields have generally been on a downward trajectory. The hope is with increased borrowing to P55 billion, the market will also see new curve points for bond yields coming in. But others anticipate that yields will keep gradually decreasing until 2025, even with the expected increase in issuances for this year.
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