Zimbabwe: TBs Auction Seeks to Raise $100m

26 September 2019

The Reserve Bank of Zimbabwe (RBZ) says it will carry out a third Treasury Bills (TBs) auction to raise $100 million.

The TBs auction system resumed this August, with two auctions carried out last month.

The first and second TBs auctions raised $30 million and $60 million, respectively.

The latest issue will be a 92-day instrument, aimed at mobilising funding for Government programmes.

"The Reserve Bank of Zimbabwe hereby invites financial institutions including commercial banks, building societies, POSB, IDBZ, insurance and pension funds and other corporates to subscribe to treasury bills amounting to raise one hundred million dollars," said the RBZ in a notice yesterday.

The offer opened yesterday and closes today.

According to the RBZ notice, investors are restricted to a maximum of two applications, of a minimum $1 million each.

The bills, which have an "open tender on yield basis" interest rate, have other special features that include prescribed and liquid asset status, tax exemption and acceptability as collateral for overnight accommodation at the RBZ.

Last year, Government announced, both in the 2019 National Budget and in the Transitional Stabilisation Programme (TSP), that it would curtail the unrestrained issuance of TBs, and that the short-term debt instruments would now only be issued via auctions instead of private issuances as they had become a major driver of fiscal disequilibrium.

Finance and Economic Development Minister Mthuli Ncube reiterated those remarks last month while presenting the mid-term fiscal policy review.

"Going forward, Government borrowings for budget purposes will observe the new TBs auction framework in order to promote transparency and the rebuilding of market confidence," he said.

The Treasury boss has also said that the TBs auctions are also meant to assist in mapping up yield curves ahead of bigger auctions that seek to mobilise funds for infrastructure development.

For the first auction, for instance, the highest interest rate offered was 40 percent, while the lowest was 15 percent, with the average rate being 15,6 percent.

There appears to be a very strong market for the Government paper, with the first two issuances being oversubscribed.

However, the high level of interest by the market in TBs is not unexpected as financial market watchers have noted that banks and other financial players have shown a preference for TBs insofar as they earn steady interest, are deemed to be more secure and are easier to get as opposed to lending out to the private sector.

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