Treasury Bills demand high

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The Reserve Bank of Zimbabwe’s second Treasury Bills auction — which was aimed at a broader market than the first one — has been oversubscribed, with bids amounting to $121 million.

This is just over double as the central bank was seeking to raise ($60 million) through the auction.

Unlike the first TBs auction, which was limited to financial institutions, the RBZ broadened the second auction to include asset managers, insurance and pension funds and “other corporates”.

The RBZ said it received bids totalling $121 million for the 365-day TBs.

The central bank floated the bills to raise money to finance Government operations, and the over-subscription reflected strong investor appetite for the instrument.

The bills had an “open tender on yield basis” interest rate, and special features, which included prescribed and liquid asset status, tax exemption and acceptability as collateral for overnight accommodation at the RBZ.

The results show that the highest rate offered was 50 percent, lowest 12 percent, while the average was 14,365 percent.

The indicated high demand for TBs among financial players, will provide a sign ahead of Government’s plans to issue an Infrastructure Bond later this year.

Earlier this month, the RBZ floated 91-day TBs to “finance Government operations”.

The TBs were offered to the various local financial institutions, which are already believed to hold the largest quantum of previously issued TBs.

That first auction’s $30 million Treasury Bills tender attracted bids worth $132,75 million.

Market watchers are, however, cautious about the market being flooded by the TBs.

“The RBZ has floated TBs of $60 million, barely a month after it auctioned $30 million worth of the same instrument and the rationale being to finance various Government programmes . . . Government is perpetuating a crowding out effect,” said analysts at Morgan & Co.

“A crowding out effect occurs when rising public sector spending drives down or even eliminates private sector spending.

“This is because the high and continuous Government borrowings tend to absorb all the lending capacity and liquidity in the economy.”

Treasury has, however, reiterated that TBs issuance will be closely monitored and will only be on a “need-to” basis.

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