Business News of Monday, 10 July 2017
The government expects to raise ¢57 billion through bonds and Treasury bills by September this year.
That is the total amount that the state should realise if it is able to raise all the amount targeted in its issuance calendar for bonds and treasury bills for the first three-quarters of this year.
In the first quarter of this year government reportedly raised ¢17.4 billion and ¢22.2 billion in the second quarter.
For the third quarter, it is also planning to raise ¢17.4 billion from July to September this year.
Some ¢43 billion of the amount is for roll over maturities, while the rest would be used to finance government’s own projects.
Details of the new third quarter calendar
The calendar showed that there would be two separate, three-year bonds that would be issued during the third quarter of this year.
The first one would be in July to raise ¢300 million, whiles the second would happen in September targeting ¢500 million.
In July this year, the government would target ¢1 billion in a five-year bond sale and another five-year bond would be issued, which would be seeking to raise ¢500 million. It is also planning to issue a 15-year bond to raise ¢2.6 billion in August.
The government in a statement disclosed that plans to issue gross amount of ¢17430 million, of which ¢14,152.80 million is to roll over maturities and the remaining ¢3,277.20 million as fresh issuance to meet government’s financing requirements.
Per this calendar, the government says it aims to build benchmark bonds through the issuance of the following instruments:
The 91-day and 182-day will be issued weekly. The 1-Year Note will be issued bi-weekly through the primary auction, with settlement occurring on first and third Mondays of each month.
However, the targets for August and September will be issued through the reopening of the following instruments, respectively: 3-year Bond (coupon of 23.47%) maturing May 21, 2018.
There will also be a 5-year Bond (coupon of 19.04%) maturing September 24, 2018, as well as a 3-year Bond (coupon of 24.50%) maturing October 22, 2018.
The 2-year Note will be issued monthly through the primary auction, with settlement occurring on the second Mondays of each month.
However, the targets for August and September will be issued through the reopening of the following instruments, respectively: 3-year Bond (coupon of 24.50%) maturing April 22, 2019. 3-Year Bond (coupon of 24.00%) maturing September 9, 2019.
The 3 and 5-year bonds will be issued through the book-building method and settlement on the last Monday of each month.
However, the 3-year target in July 2017 will be issued through the reopening of the 3-year Bond (coupon of 18.50%) maturing June 1, 2020.
The 15-year Fixed Bond in August 2017 will be a Structured Bond to convert the existing 91-Day Treasury Bills investment by the National Pensions Regulatory Authority (NPRA).
It concluded that the combination of an overall plan for the Third Quarter of 2017, should meet the requirements of market participants, as it will ensure greater predictability and transparency.
A careful look at the calendar shows that the cost of raising these funds appears to be reducing. This has resulted in government doing more of a refinancing of the existing debt, some say this is actually due to the fall in interest rates.
Reaction to the third quarter securities calendar
Economist Professor Godfred Bokpin tells JOYBUSINESS the approach adopted by the government in raising the funds, might be good because it is reducing the cost of raising the funds and lengthening the period in paying the debts.
He is, however, worried most of the long dated bonds would mature around the same period which he fears could present some challenges for the economy.