Zim resumes TBs auction system

Source: Zim resumes TBs auction system | The Herald 01 AUG, 2019

Zim resumes TBs auction systemProf Ncube

Tawanda Musarurwa Senior Reporter

The Reserve Bank of Zimbabwe said it is looking to raise $30 million to finance Government programmes through the issuance of Treasury Bills via an auction system.

Treasury Bills (TBs) are negotiable instruments issued by Government through the central bank to finance the State’s short-term requirements.

Yesterday’s auction marked the Government’s first TBs auction after Treasury last year moved to sanitise the issuance of the debt instrument by reverting to an auction system, which was last carried in 2012.

The RBZ yesterday called for bids for subscribers to 91-day TBs.

The central bank said it is in the market to raise $30 million (approximately US$3,3 million) through TBs “to finance Government programmes.”

The TBs, which will be allotted to successful bidders today (Thursday) have special features including prescribed and liquid asset status, tax exemption and acceptability as collateral for overnight accommodation at the central bank.

Last month, the Government carried a TB auction, which officials said was only to test the market and map out the yield curve.

At the time, Finance and Economic Development Minister Mthuli Ncube said they were only “testing the market” and mapping the yield curve.

“The purpose of this auction was to test the market in terms of appetite for a Treasury Bill auction and to begin to map up the yield curve,” he said.

“This is already telling us about the shape of the yield curve and where long term interest rates are going so that when we issue an infrastructure bond, we have an idea as to the kind of pricing we should accept as government when the market responds to the placement of this long term infrastructure bond.”

TBs have different maturities, and the ‘test’ TBs had 91-day, 182-day and 365-day maturities at interest rates of 16,5 percent, 19,6 percent and 17 percent, respectively.

Last year Treasury placed a suspension on the issuance of TBs, as there were concerns that the market had become flooded.

Figures provided by put total issued TBs at US$6,3 billion of which US$1 billion where issued for the Zimbabwe Asset Management Company (ZAMCO) to purchase non-performing loans (NPLs).

And earlier figures from Treasury indicated that around 50 percent of the TBs were currently being held in medium to short-term paper, while 26 percent had tenors of between 2,5 to 5 years. 17 percent of the TBs have tenors of between 6 to 10 years, and the balance have a tenor of between 11 to 15 years. And TBs from the secondary market have coupon rates ranging from 2 percent to 5 percent with maturity periods ranging from one year to four years.  A number of financial players hold Government-issued TBs, as they had become the main debt instrument available in the market after Government converted its legacy debt into short-dated Government security.