Africa-Press – Eswatini. Central Bank of Eswatini has opened up the first investment opportunity in 2024, through the issuance of bonds at fixed coupon rates of up to 11 per cent to the tune of E400 million.
This is the first launch of the government bonds in 2024, following the four government bonds that commenced or re-opened trading in December 2023. Generally, central banks issue bonds as one way to raise money and they are a good investment opportunity for businesses to make good yields. A government bond is a type of debt-based investment, where one loans money to the government in return for an agreed rate of interest. Governments use them to raise funds that can be spent on new projects or infrastructure and investors can use them to get a set return paid at regular intervals.
Risks
Advantages of investing in government bonds include safety, regular income, diversification and capital preservation. However, they may yield lower returns compared to riskier investments and are susceptible to interest rate and inflation risks. International bonds also entail credit risk. In a call for tender published yesterday, the central bank re-opened the government bonds to the sum of E400 million with coupon rates fixed at 10, 10.25, 10.50 and 11 per cent. These coupons are set to mature in 2026 to 2033 respectively.
The bonds will be issued using the competitive multiple bid auction models and is open to the public including individuals, corporate and institutional investors.
The value of these bonds reflects a double as the previous bonds were often value at E200 million. The latest bond was issued in December 12, 2023. According to the central bank, the minimum bid size is E10 000 for individual (non-competitive) bidders and E1 000 for institutional direct bidders. According to the CBE, yield to maturity to be quoted on in multiples of 0.005 per cent. The auction date will be on January 26, 2024. These bonds are issued under the E5 000 000 Note Programme (NP) 2021 listed on Eswatini Stock Exchange (ESE).
All investors should apply through the primary dealers who are the four local commercial banks.
The purpose of the issuance is to develop the secondary market, establish a fair market price which will compensate both the borrower and investors for interest rate risks and to facilitate financial intermediation, while also meeting Government budgetary requirements. It is worth noting that as of December 31, 2023, total government bonds stood at E6 418 176 000. Month-on month, government bonds increased by 2.27 per cent from E6 275 496 000 at the end of November 2023, to E6 418 176 000 at the end of December 2023.
Maturities
According to the Eswatini Stock Exchange (ESE) month end report for December 2023, on a yearly basis, there was an 8.31 per cent increase from E5 925 730 000 in December 2022 to E6 418 176 000 at the end of December 2023. There were no government bonds that matured in December 2023. During the ESE fourth quarter of 2023, Government, through the CBE maintained 32 bonds with different maturities ranging from 3, 5, 7, 8, 9 and 10 years. Total outstanding bonds value at the end of the 4th Quarter was E6.418 billion. The ESE reported that there was a 4.28 per cent increase from the previous quarter’s close of E6.155 billion. This was due to the higher value of new bonds and re-openings while the value of maturities was lower in the period under review. Year-on-year, there was an 8.31 per cent increase in value of bonds trading from E5.926 billion at the end of the 3rd Quarter 2023 to E6.418 billion) at the end of the 4th Quarter 2023.
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