Listed debt instruments meant to raise capital and refinance domestic debt did not register any trading activity on the Malawi Stock Exchange (MSE) in the just-ended year.
Analysts have attributed the development to limited alternative investment instruments.
A latest report from MSE shows that five corporate notes issued by MyBucks Banking Corporation and 23 government Treasury notes with a total nominal value of K916.58 billion did not register any trades last year.
MSE operations manager Kelline Kanyangala in an interview on Thursday observed that while non-tradability of bonds is an issue that is common for most exchanges within the region, most bondholders usually hold the instruments to maturity.
She said: “One of the challenges we have observed is that investors hold on to their securities and thus do not usually trade.
“There is also lack of awareness on the issue of bonds, which further contributes to the lack of trades. However we are working on a few projects to ensure we see more bonds trading on the market.”
Kanyangala said on the flipside, it is favourable for investors to hold on to their securities and gain the relatively better interest rates.
Commenting on the same, Stockbrokers Malawi Limited chief executive officer Noel Kadzakumanja observed that the development would mean that bondholders are happy holding on to the bonds as investors who prefer holding their investment until maturity.
Lately, Treasury has resorted to long-term borrowing, shifting away from short-term borrowing, a development analysts have described as a positive move towards debt restructuring.
Latest on the table was a 10-year Treasury Note—a marketable government debt security with a fixed interest rate and maturity of between one and 10 years—at a coupon rate of 15 percent issued in December 2020 to help Treasury raise money to refinance its debt.
Analysts back government’s shift to long-term instruments as it is struggling with debt because of the time aspect of the bonds.
“The prospects are now great because we are currently in a period where things are pointing to a further decline in interest rates.
“The RBM [Reserve Bank of Malawi] recently hinted that the policy might be further cut and that should be some good news,” said Alliance Capital Limited research manager Bond Mtembezeka.
Government’s Treasury note issuance comes amid growing public debt accrued by government, with latest figures showing the country’s debt stock is at K4.1 trillion as of June 2020, an increase from K3.4 trillion in December 2019.
The current debt stock represents 59 percent of the country’s total wealth as measured by nominal gross domestic product (GDP), which is estimated at K8.1 trillion.