The K20 billion ($27 million) two-year fixed coupon bond which the central bank issued in August to refinance debt is yet to register any trading activity, two weeks after listing on the Malawi Stock Exchange (MSE).
In an interview with Business Review on Tuesday, MSE operations manager Esnat Chilije said although the Treasury note was listed on October 9th this month, there is yet be any trade on the secondary market.
“The Treasury note was fully subscribed on the primary market. After listing on October 9 2017, there hasn’t been any trading on the secondary market.
“This is so because the treasury Note was subscribed for by institutional investors who mostly invest to maturity as they have more appetite for long-term investments. Such investors rarely sell the securities on the secondary market unless they find alternative investments or are in need of liquidity.” said Chilije.
In an interview on the issuance of the Treasury Note, market analysts Cosmas Chigwe said cautioned on the need to trade on the secondary market.
“I feel as a market, we need to understand the importance of trading these securities on the secondary market. We have seen a number of these securities listed on the MSE but I doubt the market trades them there,” he said.
Two years ago, the central bank also issued a K15 billion bond two years ago which received lukewarm response as investors were skeptical to invest in long-term treasury notes as risk remain high with the major hiccup been on reaching a consensus on bond pricing between the borrower (treasury) and investors.
Prior to that, government had also issued two K20 billion bonds at rates of 14 and 12 percent respectively, but did not attract the expected response.
Reserve Bank of Malawi (RBM) spokesperson Mbane Ngwira, however, said the full subscription of the K20 billion treasury note is an indication that long term investments are attractive with the macro-economic stability.
“The macro-economic stability rate we are facing now coupled with slowing inflation, stable exchange rate and reduced interest rates all point to the prospects of an improving economy and this makes long-term investment attractive.
“If the country is not that stable, you think the best is to hold on to liquid assets that to buy the notes as investors think they may lose out. So, this has to do with the macro-economic stability,” he said. n