Namibian $ 2.2 billion oversubscribed government bond auction

A call by the Bank of Namibia last week to seek N $ 2.1 billion for the state attracted N $ 4.2 billion, the central bank said on Wednesday.

This amount is double what the bank was looking for and presents an economic scenario where there is more money looking for long term and risk free investments.

The bonds auctioned have a maturity of between 2 and 29 years and depending on the auction results, they have all been oversubscribed.

Oversubscription was mostly prevalent on bonds with a longer maturity – with the GC50 oversubscribed by N $ 147 million.

The GC50 had N $ 60 million at auction and was 245% oversubscribed. He pays a coupon of 10.5%.

After GC50, GC27 was 240% oversubscribed.

Normal (N $ 1.6 billion) and inflation-linked (N $ 400 million) bonds were offered, and the government was auctioning as little as N $ 50 million.

Government bonds are financial instruments through which the government borrows.

The minimum amount for Namibia is N $ 50,000, and the coupon (interest) paid on it is always higher than the average interest paid on a savings account, as well as on some money market products.

Normal bonds pay a coupon of 8% and more, while inflation-linked bonds average between 4% and 4.8%.

According to the government’s borrowing plan, the state is expected to withdraw over N $ 2.7 billion from the market this month in fixed income securities, if T-bills are included.

Although the public has various avenues for investing their savings, government securities offer the most stable investment. Over the years, government bonds have been primarily underwritten by pension funds.

According to the government’s borrowing strategy for this fiscal year, the state wants to raise at least N $ 12.9 billion.

At least N $ 10.8 billion has been allocated to fixed rate bonds, while inflation-linked bonds are expected to bring in the remainder of N $ 2.1 billion.

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