GOVT AUCTIONS E150M BONDS

 MBABANE – On behalf of government, the Central Bank of Eswatini (CBE) has announced the reopening of E150 million bonds.

The bonds will be issued using the competitive multiple bid auction model and it is open to the public including individuals, corporate and institutional investors. All investors should apply through the primary dealers who are the four local commercial banks.

The coupon rates for these bonds are fixed at 9.40, 9.85, 10.25 and 10.50 per cent, respectively.
“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 rates risks and to facilitate financial intermediation, while also meeting government budgetary requirements,” reads a correspondence from government.
    Investors are to submit application forms for bids through their primary dealers.

“Investors should ensure that applications are submitted timely in order that all bids are captured on the Central Securities Depository System before 10am on the auction date,” further reads the correspondence.

Settlement

The auction date is July 28, 2020. The settlement date is three days later (July 31).
Auction results shall be made available on CBE’s website immediately after the auction. The yield is to be quoted in multiples of 0.005 per cent.
The minimum bid size is E10 000 for individual (non-competitive bidders). For institutional direct bidders, the minimum bid size is E1 million.
Interest income is not subject to any withholding tax.

Interested parties are to contact their commercial banks or collect application forms and further details at the CBE Financial Markets department.
Usually when governments want to raise money, they do so by issuing bonds.
The method is usually an auction. The issuer wants to raise capital as cheaply as possible and that means at the lowest possible yield. So the more a bidder bids, the lower the yield will be.

A competitive auction is where institutional and individual investors fight to get the bonds. It should ensure the issuing government raises the money it needs at the lowest cost.

Bonds

Once all bids have been received, bonds are allocated at a single price to all successful bidders that price is usually the one that represents the highest yield from the bids accepted (so the higher your bid price, the more likely it is you will be allocated some bonds).
Alternatively, you may bid non-competitively and take bonds at the yield determined by the competitive bid process.

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