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Next week’s bond auction opens


IN its last round of borrowing for the month, the state will borrow some N$215 million next Wednesday – just after borrowing N$1,5 billion this week.

The Bank of Namibia yesterday put out a call for investors to participate in the bond’s auction, slated for 26 October, the day of the second last monetary policy committee announcement.

This week, the central bank on behalf of the state raked in N$1,5 billion, borrowed through treasury bills.

On offer were the 91 days, 182 days and 364 days treasury bills which were oversubscribed at N$2,1 billion.

Next Thursday, the bank will also auction 273 days of treasury bills.

To this time though, participating in lending to the state is not that cheap, with the asking price at N$50 000 for starters. The demand for Namibian government securities has been high, at times with the state even sweeping from the market more excess cash than it had on offer.

There are still five more months before the end of the fiscal year, and billions are still to be borrowed.

For the third quarter of the year, the state is known to be a heavy borrower, and last year over the corresponding quarter, the state paid out N$9,4 billion to service its rolling debt.

Government securities are largely the only ones paying reasonable returns at the moment.

According to the recent central bank quarterly bulletin, yields on treasury bills (TBs) rose in line with a rise in benchmark rates in the second quarter of 2022.

The 91-day TB rate rose during the second quarter of 2022, moving higher by 152 basis points year-on-year to reach a level of 6,06% in June 2022.

The longer-term TB rates increased more significantly on the back of an increase in demand and an expected increase in interest rates.

The effective yields on the 182-day, 273-day and 365-day TBs increased to 6,6%, 7,29%, and 31% at the end of the quarter ending June 2022.

This increase in TB rates is in line with a rise in local policy interest rates, Wibars and South African money market rates during the period under review.

Notably, the central bank said investors in TBs continued to earn significant positive real returns, as the yields continued to be notably higher than the average inflation rate during the period under review.

Inflation for the month of September was at 7,1%.

According to the central bank’s bulletin, the debt stock of the central government rose over the financial year 2022/23 to the end of June 2022, driven mainly by a rise in domestic debt.

The total government debt stock stood at N$130,3 billion at the end of June 2022, representing yearly and quarterly increases of 9,6% and 3,7%, respectively.

The increase on a yearly basis was driven by a rise in the issuance of both TBs and internal registered stock (IRS).

Meanwhile, external debt declined year-on-year owing to the redemption of one of the Eurobonds in November 2021, ascribed to a rise in the issuance of TBs as well as the IRS, coupled with a rise in external debt owing to exchange rate depreciation during the quarter under review.

Total debt as a percentage of GDP stood at 68,2% at the end of June 2022.

“Going forward, the total debt stock is anticipated to rise to N$165,5 billion over the medium term expenditure framework period, which represents 75,2 percent of GDP. The debt-to-GDP ratio continued to rise further above the SADC benchmark of 60% of GDP,” said the central bank.

It will be difficult to avoid a global recession in 2023, and the recent surge in global bond yields is already reflecting the market’s expectation of a significant economic downturn next year. The good news for investors, however, is that all types of bonds – government and corporate, high- and low-quality – are now looking attractive.

This is the view of Jim Leaviss, chief investment officer at M&G Investments in London, who spoke at an M&G presentation in Pretoria, South Africa, recently.

Email: [email protected]

Twitter: @Lasarus_A





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