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GOVT ISSUES E150M BONDS TO RAISE FUNDS

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MBABANE – Cash-strapped government continues to issue more bonds in a bid to raise funds.

This is simply a debt-based investment, where you loan money to government in return for an agreed rate of interest. Governments use to it  raise funds that can be spent on new projects or infrastructure and investors can to get set returns paid at regular intervals.

On behalf of government, the Central Bank of Eswatini (CBE) announced the issuance of the former’s four bonds ranging between E20 million and E50 million with coupon rates fixed at  8.50, 9.00, 9.50 and 10 per cent. They are for a sum of E150 million. The purpose of the issuance is to develop the secondary market; establish a fair market price which wil compensate both the borrowers and investors for interest risks; and to facilitate financial intermediation while also meeting government budgetary requirements.

“All investors should apply through the primary dealers who are the four local commercial banks,” reads the statement in part. The bonds, according to a statement from CBE, would be issued using the competitive multiple bid auction model and is open to the public including individuals, corporate and institutional investors.

auction

The auction date will be on January 26, 2021. Investors are reminded to ensure that applications are submitted timely in order for all bids to be captured on the Central Securities Depositary System before 10am on the auction date. Auction results shall be made available on the CBE’s website immediately after the auction. The settlement date is three days later (January 29). The yield to maturity 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 size is E1 million. The interest income is not subject to any withholding tax.

“Successful bidders who fail to honour their obligations on time, will be disqualified from participating in one subsequent bond auction,” warned CBE.

The applicable pricing supplements and other relevant documents pertaining to the issuance, according to the bank, are available for viewing at the Financial Markets department of CBE at Umntsholi Building in Mbabane as well as the website (www.centralbank.org.sz).

Meanwhile, at the end of the third quarter of 2020, the Eswatini Stock Exchange had reported that total outstanding bonds increased from E 5.07 to E 5.33 billion as of September 30, 2020. The increase in value of bonds trading was due to eight reopenings during the period under review. Year-on-year, total government bonds outstanding increased by 65 per cent.

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