Government bond yield curve steepen

Bonds return 1.1 percent

Government bond yield curve steepen

The September 2020 Government Bond and Treasury Bill Auction saw Government securities worth over P2.1 billion on offer, an increase of P301 million from the May 2020 auction, a quarterly report by Kgori Capital shows. 

According to the report, the net issuance at the auction was NIL, however, due to the P2.1 billion BW008 maturing on the same day coupled with Government having exhausted its P15 billion bond programme during its May 2020 auction.

The bid-to-cover ratio was 1.4, slightly lower than the 1.5 achieved in May 2020. Antwi Kwabena, Kgori Capital Portfolio Manager says the most demanded instrument was the BW014. “Government was selective with regards to final allocation, preferring to issue more BW014 than initially offered due to the higher demand for the bond.”

In Q3, bonds returned 1.1 percent driven by coupon returns as yields were mostly unchanged (meaning prices were flat). The Government bond yield curve steepened with the spread between the BW013 (shortest dated Government bond) and the BW015 (longest dated Government bond) increased to 2.3 percent from 2.1 percent in June 2020, so indicates Kgori Capital citing policy rate cut in August.

According to the BSE, the value of bonds traded during the year-to September 2020 period was P1.99 billion, compared to P1.43 billion traded during the same period in 2019. During this period the following corporate bond listings occurred: RDCP002 – Listed 26th March 2020 (Nominal amount P40.2 Million), RDCP003 – Listed on 26th March 2020, LHL006 (additional tranches) – Listed 19 June 2020 (Nominal amount P20.68 Million), BDC004 – Listed 29th September 2020 (Nominal amount P162.14 Million).

Bank of Botswana (BoB) held three (3) bond auctions so far in 2020. At its first bond auction on 28 February 2020 BoB issued additional tranches of the following bonds: BW013 (P300 million allotted); BW014 (P400.0 million allotted); and BW015 (P95.0 million allotted). The total amount raised through the reopening was P795 million. At its second auction on 29 May 2020 additional tranches of the following bonds were issued by BoB: BW012 (P336.0 million allotted); BW013 (P381.0 million allotted); and BW014 (P628.0 million allotted). From this bond auction, a total amount of P1, 345 million was raised.

At its third bond auction on September 3rd 2020 Government raised P1, 830 Million from reopening the following bonds: BW013 (P365.0 million allotted); BW007 (P434.0 million); BW014 (P948.0 million allotted) and BW015 (P83.0 million Allotted). Thus far Government has raised P3, 970 million through bonds listed on the BSE. As at end of September 2020, the market capitalisation of listed bonds stood at P19.2 billion.