Treasury’s K20 billion 10-year bond issued last Tuesday has received a positive response from the investing public, a development analysts say reflects investors’ appetite for long-term securities.
The bond, issued as part of the infrastructure development bond, which is set to raise about K1 trillion to help finance public infrastructure development projects, received applications amounting to K26.9 billion.
Results of the auction from Reserve Bank of Malawi (RBM) show that 33 investors applied for the note, out of which six emerged successful which means government will receive K18.45 billion.
Malawi Stock Exchange (MSE) operations manager Kelline Kanyangala said in an interview it is encouraging to see the positive response from investors on the infrastructure bond.
She said: “This is reflective of the appetite that is available for long-term securities in our market. As you know since the enactment of the Pensions Act, we have seen a significant increase in pension funds; these funds are looking for investment opportunities to generate growth.
“As Malawi Stock Exchange, we would like to encourage the private sector to take a similar route to utilise these domestic funds to grow their businesses and the economy.”
On his part Bridgepath Capital Limited chief executive officer Emmanuel Chokani observed that the bond has attracted better yields slightly higher than the recently issued 10-year Treasury note.
He said: “We see that demand was high as around K26 billion was applied for at cost value and they only allotted K13.35 billion.
“This could mean that investors were demanding higher yields than possibly over the 23.25 percent yield that was allotted.”
Chokani cautioned that using the funds for the intended purpose would be crucial, adding that channelling funds to specific projects is a welcome development as financing recurring expenditure has been rising.
But despite Treasury facilitating the growth of the debt market by issuing government securities with a wider maturity range from 91 days to 10 years, the response from the public has been lukewarm.
For instance, the 23 government Treasury notes with nominal value of K916.58 billion listed on the MSE to raise capital and refinance debt are yet to register any trading activity.
The targeted K1 trillion that government intends to raise from the domestic market represents 13 percent of the value of the national economy as measured by gross domestic product.