By: Nghiinomenwa-vali Erastus
Investors in the government bonds, specifically the GC24 bond which is maturing next year, have submitted an N$1.3 billion switch application for their investment to be moved to other long-term bonds.
The switch auction was held on 27 September.
The GC24, which is maturing next year in October, had an outstanding amount of N$3.9 billion as of 31 August 2023.
The redemption of this outstanding capital (money borrowed plus the accrued interest) will be made upon the maturity of the bond on the 15th of the same month.
However, with the switch auction that took place the government now does not have to redeem or pay the whole amount borrowed or outstanding on the bond.
According to the results of the auction, the Bank of Namibia has managed to switch N$1.1 billion of GC24 into the other 11 long-term debt instruments of the government.
This is to say that some individual investors who have loaned money to the government through the GC24 bond have opted not to get their investment back on 15 October 2024.
They have instructed the central bank to invest their N$1.1 billion in other 11 long-term bonds for further growth through semi-annually interest payments.
At this stage, as indicated by the result of the switch auction, it also means the government will have to pay back N$2.9 billion to other investors who did not request for the switch.
However, this amount to be paid back to the investors inclusive of interest can also change because there is another switch auction planned on the 21 February 2024.
It means the undecided investors still have time to choose if they want their investment back after maturity or if they would want to invest further into other long-term bonds and grow their money through government debts.
Furthermore, there could be more switch auctions for the GC24 in 2024 before the maturity, and the outcome will determine how much the government will pay back on 15 October 2024.
For now, the bond issuance calendar which also includes switch auctions for the 2024/25 financial year is not out to show if there are more switch auctions beyond the 21 February auction.
As for this week’s switch auction, the results show that investors wanted to invest more in the long-term debt instrument compared to the short-term one, particularly on the GC48 and GC50.
The results show that more than half a billion (N$652,8 million) was submitted for the switch to the GC48 and GC50 and the Bank of Namibia approved N$620.3 million to be switched to the two bonds.
Almost every year, the government has a bond maturing, and if the investors do not opt to switch their investment on the particular bond to another long-term debt, it means the government has to repay the principal amount plus the interest.
As for this year, the GC23 is maturing during October 2023 and according to data updated on 31 August 2023 on the Bank of Namibia website, there was N$2,05 billion outstanding on this bond.
Overall, the government’s internally registered bonds (GC23 to GC50) have an outstanding balance of N$109,8 billion that is owed to investors and the government has been using the money to fulfil its budgetary promises.
As for the investors they get interest twice a year to reward them for availing their money to the government for a certain period as described by each bond maturity and coupon. Email: erastus@thevillager.com.na
