Namibia: Positive Returns Increase Demand for Govt Bonds

14 October 2020

The demand for government bonds slightly rose during the second quarter of 2020 due to relatively attractive returns. Yields on short to medium-term bonds declined by more than 50 basis points. The effective yields on government bonds varied both on an annual and quarterly basis during the second quarter.

According to the Bank of Namibia quarterly bulletin report, the bonds (GC23) recorded the lowest yield, decreasing by 240 basis points and 200 basis points year-on-year and quarter-on-quarter, respectively, to 6%.

On the contrary, yields for the GC37, GC40 and GC45 rose by more than 150 basis points on an annual basis and by more than 40 basis points quarterly to end at 12.06%, 12.20%, and 12.80%, respectively.

The report further stated that the yields on all treasury bills declined quarter-on-quarter and year-on-year at the end of the second quarter of 2020. The yields on the 91-day and 182-day treasury bills declined by 309 basis points and 321 basis points on an annual basis to reach a level of 4.58% and 4.6% during the second quarter of 2020, respectively.

"On a quarterly basis, the yield on the 182-day treasury bills similarly declined by 287 basis points, mainly driven by the strong demand for treasury bills, while the yield for the 91-day treasury bill declined by 309 basis points," reads the report.

The effective yields for the 273-day and 365-day TBs declined to 4.64% and 4.61% at the end of the second quarter of 2020, from 7.88% and 7.96% at the end of the same period in 2019.

The declining yield levels on treasury bills are in line with the decline in money market rates as well as an increase in demand for treasury bills. Investors in treasury bills continued to earn significant positive real returns, as the yields were notably higher than the average inflation rate during the review period.

On the other hand stock exchange activities at the Namibia Stock Exchange (NSX) were characterised by an annual decline in both the overall and local indices during the second quarter of 2020. The overall index declined significantly by 23.4% to close at 1054.9 index points, year-on-year at the end of the second quarter of 2020.

However, the bulletin report stated that on a quarterly basis the overall index posted a recovery of 17.2% aided by recoveries in the indices of basic materials, industrials, financials and consumer goods.

"The annual decline in the overall index was driven by decreases in all the indices consistent with the weak performance of the dual-listed shares during the period under review as stock markets globally continue to recover from the shocks associated with Covid-19 pandemic," explained the report.

Similarly, the local index decreased by 15.7% and 7.7%, year-on-year and quarter-on-quarter to close at 515.07 index points at the end of the quarter under review. The Johannesburg Stock Exchange (JSE) all-share index declined by 6.6% to close at 55 722 index points over the same period.

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