Results of the fourth auction of the K30 billion (about $179.6 million) Reserve Bank of Malawi (RBM) bond have shown that investors are still not willing to put their money in the longest ever bond in Malawi’s history with only two-year treasury note subscribed.
The RBM issued the debt security on December 23 2011 to restructure government’s domestic debt and develop a benchmark yield curve.
In the past auctions since last year, the uptake has been slow because investors are not willing to lock their money in the long term, analysts say.
According to the published results, in the auction held on March 29 2011, the RBM raised K620 million (about $3.7 million) and this was from the two-year treasury note at an average yield of 14.13 percent.
This has put the total amount of funds raised in three auctions to K11.5 billion (about $68.7 million), representing a 38.7 percent subscription of the total amount, up from the third auction’s 36.6 percent.
Investors not sure of future
A market analyst said the results shows that investors, as has been the experience since the auction were opened, are not sure of the future.
“Investors are still not sure if it is worthwhile to subscribe to longer tenors. They do not want to lock their money for long,†said the analyst, adding this signals that the economy is in dire straits.
With the average yield at 14 percent, investors may be looking for yields of as high as 20 to 25 percent, said the analyst, adding that investing in the bond with the current yields is too high a price to pay.
The outstanding amount, according to the results, stand at K18.4 billion (about $110.2 million).
In the auction, the RBM offered K4.76 billion (about $28.5 million) in the K10 billion (about $59.9 million) two-year treasury note but the nine investors applied for K2.25 billion (about $13.5 million). The central bank only allotted K620 million (about $3.7 million) to five investors at an average yield of 14.13 percent with K4.05 billion (about $24.3 million) outstanding.
The one investor that applied for K400 million (about $2.4 million) in the three-year K10 billion treasury note was not offered the amount despite the RBM offering K6.82 billion (about $40.8 million), the amount that is also remaining in this bond.
In the four and five year treasury notes amounting to K5 billion (about $29.9 million), investors did not apply for any despite the RBM offering K3.42 billion (about $20.5 million) and K4.18 billion (about $25.02 million), respectively.
According to the RBM, the two and three year notes offer coupons (interest) of 8 percent and 8.5 percent, respectively, while coupon rates on the four and five year notes are 9.5 percent and 10 percent.
