By: Nghiinomenwa Erastus
Government debt through widening the budget deficit is just bad if you don’t have any savings.
Last week, the government auctioned three and nine-month treasury bills (TBs) to raise N$1,06 billion.
According to the result of the auction released by the Bank of Namibia, the market has oversubscribed the two short securities (financial assets) by N$777,59 million.
According to the tender invitation, the government, through the central bank needed to borrow N$500 million for three months from the market.
The auction results show that the market has responded through 43 bids valued at N$911,2 million exceeding the required amount by more than N$411,2 million.
This can be interpreted that during the auction, the market (institutional and retail investors) was willing to lend to the government N$911,2 million for three months at an interest.
With the nine-month TBs, the government wanted to borrow N$560 million to use for the next nine months at interest.
Those with the know-how and with savings or tasked to grow others’ savings responded to the government’s investment call through 29 bids to lend N$926,39 million at different rates.
This exceeded the required amount for the auction by more than N$300 million.
The allocation by the central bank depends on the discount rate proposed by the investor with the government expecting to pay the lowest yield possible.
The investor money will be tied up for three months and nine months respectively with an option to roll it over to other TBs issued at maturity date.
The current financial year has a funding gap of around N$30 billion and until the financial year-end, the government will keep running to the market to borrow.
The central bank has issued another auction notice for six and 12 months to raise N$110 billion from the market (individuals and companies).
The government seeks to borrow N$550 million through each TB on Thursday this week and payable by Friday, the 23 September 2021.
For those interested, the central bank indicated in the notice that the minimum a person can bid for is N$10 000 and disclose how much extra they want at the end of the period (yield).
To indicate your interest to lend to the government, a subscription form is available on the Bank of Namibia website and it should reach the bank before 10h00 on Thursday. Email: email@example.com