RBZ in market for $300m TBs

Golden Sibanda Senior Business Reporter
THE Reserve Bank of Zimbabwe (RBZ) is back in the market with a fresh batch of Treasury Bills (TBs) — this time with a shorter tenure compared to the last issuance — to raise $300 million Treasury requires to finance key Government programmes. Market intelligence indicated yesterday that part of the financial resources raised will go towards funding the 2019 National Budget needs. The latest fundraising comes as the central bank is liquidating an almost equivalent value of TBs that have matured.

The RBZ has reduced the tenure for the current TBs by half to 180 after the previous attempt to raise $150 million found few takers (34 percent was allotted) amid revelations that the market has no appetite for long-dated paper due to the prevailing inflationary environment.

As such, the central bank this time hopes for better response to the 182-day Government paper, which is open to commercial banks, building societies, POSB and Infrastructure Development Bank (IDBZ).

Allotment will begin today and special features of the TBs include prescribed asset status, liquid asset status, tradability, tax exemption, acceptability as collateral for overnight accommodation by central bank and allotment at a weighted average rate.

“Applications must be for a minimum amount of one million Zimbabwe dollars (ZWL$1 million),” the RBZ said.

The apex bank is also using the current TB raising exercises to define a yield curve for Government paper, which will help guide issuance of future Government securities such as the longer dated bond, which it intends reintroducing.

Notably though, while earlier market operations to raise smaller amounts of $30 and $60 million through 91-day TBs were met with overwhelming market response, it has been a different case with longer term paper, shunned by the market.

The last time the bids outpaced the amount on offer was in September when the 91-day auction was oversubscribed to the tune of 319 percent at an average yield of 13,6 percent.

In its last two TBs issuance, RBZ failed to raise the targeted amounts, underlining the huge disconnect between inflation “realities” being experienced by investors in the country and the expectations of policy makers.

Early last month the central bank was in the market seeking to raise $150 million to finance Government programmes through 365-day TBs, but only $51 million was allotted at an average yield of 15,49 percent, 40 basis point firmer than previous


Two weeks earlier, RBZ had undertaken public auction of TBs to raise $300 million, but was way off its target by a wide margin after it only managed to raise $81 million.

Market analysts say investors believe inflation will continue trending upwards, despite Government expecting to see monthly inflation dropping to 10 percent by end of the year.

The Zimbabwe National Statistical Agency reported last month that the month-on-month inflation rate in September 2019 came in at 17,72 percent, shedding 0,35 percentage points on the August 2019 rate of 18,07 percent.

The annual rate raced from 5,39 percent in September last year to 175,6 percent by June, when the last inflation figures were published.

Publication of the annual figures will resume in February next after a full year since Zimbabwe adopted local currency, which enhances between representation of the inflation trends.

Authorities expect monthly inflation to fall to 10 percent in the next two months on account of tight fiscal and monetary policy reforms.

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