Bond yields in Namibia expected to rise
Bond yields in Namibia expected to rise

Bond yields in Namibia expected to rise

Funds from the state account was used to repay N$930 million outstanding capital on the GC22 bond on 17 January 2022 and not from the local sinking fund.
Phillepus Uusiku
PHILLEPUS UUSIKU

Bond yields in Namibia are expected to rise in 2022, more for the medium to long end of the yield curve, as foreign investors are expected to sell off emerging market bonds.

In addition, local investors are expected to adjust their inflation and interest rate expectations, according to Theo Klein, economist at Simonis Storm.

Short-term bonds (GC23 to GC27) are currently on average 42 basis points below their pre-pandemic levels. Medium-term bonds (GC30 to GC37) are 165 basis points higher on average and long-term bonds (GC40 to GC50) are 168 basis points higher on average, he pointed out.

Klein is of the view that this came as a result of Inflation and interest rate expectations being adjusted upwards due to supply chain bottlenecks leading to historically high inflation rates in developed countries and higher inflation in emerging markets.

In addition, having removed the time effect, it could be that market participants are expecting low inflation to persist in the short run in Namibia, and this could explain why short-term bond yields are below pre-pandemic levels.

Thirdly, persistent weak growth, weaker fiscal metrics and a slow pandemic recovery has increased the risk perception of bonds and therefore risk premia have increased, especially at the longer-end of the yield curve.

BoN

The Bank of Namibia (BoN) has a local and foreign sinking fund, used to repay the capital portion of domestic (local and JSE listed bonds) and foreign currency denominated debt respectively.

Funds from the state account was used to repay N$930 million outstanding capital on the GC22 bond on 17 January 2022 and not from the local sinking fund. The local sinking fund has a balance of N$1.88 billion.

The local sinking fund is mainly funded by incoming Southern African Customs Union (SACU) receipts. Between N$200 and N$400 million is transferred to the local sinking fund on a quarterly basis.

The management of the fund is split between asset management companies Ninety-One and Coronation (South African).

The central bank held five GC22 switch auctions in the last two years, with the first held on 18 November 2020. From the five switch auctions, a total of N$3.3 billion in bids was received and only N$2.1 billion was switched, Klein added.

Maturity

The next maturity, the GC23 bond, currently has a total debt of N$4.8 billion and matures on 15 October 2023.

“Given the current sinking fund balance of N$1.88 billion, we expect between four and six switch auctions to take place during 2022 and early 2023, assuming no funds emanate from the state account to assist in repaying the GC23 debt,” the economist said.

Bank of Namibia has also indicated that they will schedule switch auctions for GC24 towards the end of 2022.

If the -5% forecast in SACU revenue materialises for the next seven quarters ending September 2023, the central bank can contribute between a lower and upper limit of N$1.4 billion and N$2.8 billion towards the local sinking fund, depending on N$200 or N$400 million quarterly contributions.

Based on the current balance and the lower and upper limit contributions over the next 7 quarters, the local sinking fund will have a shortfall of between N$1.5 billion and N$140 million which would have to be switched into longer-term maturities, Klein said.

These calculations take into account that GC23 will be off-the-run (not offered in the primary market) so that the N$4.8 billion debt remains unchanged.

Across the yield curve, domestic debt currently stands at N$51.2 billion in fixed rate bonds only. Short-term bonds have a total debt of N$21.3 billion, medium-term bonds have N$18.3 billion and long-term bonds have N$11.6 billion. GC24 and GC25 are currently off-the-run, with the potential announcement of GC23 and GC27 also being off-the-run at the next Budget Speech, he said. [email protected]

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Namibian Sun 2024-03-28

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Katima Mulilo: 19° | 37° Rundu: 17° | 33° Eenhana: 18° | 33° Oshakati: 20° | 31° Ruacana: 19° | 33° Tsumeb: 17° | 29° Otjiwarongo: 16° | 28° Omaruru: 18° | 31° Windhoek: 17° | 28° Gobabis: 17° | 28° Henties Bay: 16° | 19° Wind speed: 24km/h, Wind direction: S, Low tide: 10:54, High tide: 04:57, Low Tide: 22:58, High tide: 17:16 Swakopmund: 15° | 17° Wind speed: 29km/h, Wind direction: SW, Low tide: 10:52, High tide: 04:55, Low Tide: 22:56, High tide: 17:14 Walvis Bay: 16° | 22° Wind speed: 33km/h, Wind direction: SW, Low tide: 10:52, High tide: 04:54, Low Tide: 22:56, High tide: 17:13 Rehoboth: 18° | 29° Mariental: 22° | 32° Keetmanshoop: 21° | 34° Aranos: 21° | 31° Lüderitz: 15° | 29° Ariamsvlei: 23° | 34° Oranjemund: 15° | 21° Luanda: 27° | 30° Gaborone: 20° | 32° Lubumbashi: 17° | 24° Mbabane: 15° | 23° Maseru: 12° | 28° Antananarivo: 16° | 27° Lilongwe: 17° | 29° Maputo: 20° | 28° Windhoek: 17° | 28° Cape Town: 17° | 23° Durban: 21° | 25° Johannesburg: 18° | 28° Dar es Salaam: 26° | 32° Lusaka: 18° | 30° Harare: 15° | 31° Currency: GBP to NAD 23.85 | EUR to NAD 20.41 | CNY to NAD 2.62 | USD to NAD 18.93 | DZD to NAD 0.14 | AOA to NAD 0.02 | BWP to NAD 1.33 | EGP to NAD 0.39 | KES to NAD 0.14 | NGN to NAD 0.01 | ZMW to NAD 0.74 | ZWL to NAD 0.04 | BRL to NAD 3.8 | RUB to NAD 0.2 | INR to NAD 0.23 | USD to DZD 134.33 | USD to AOA 832.63 | USD to BWP 13.71 | USD to EGP 47.35 | USD to KES 130.98 | USD to NGN 1415.13 | USD to ZAR 18.93 | USD to ZMW 25.01 | USD to ZWL 321 | Stock Exchange: JSE All Share Index 74536 Up +0.85% | Namibian Stock Exchange (NSX) Overall Index 1528.69 Up +0.84% | Casablanca Stock Exchange (CSE) MASI 12986.94 Up +0.04% | Egyptian Exchange (EGX) 30 Index 27559.35 Down -2.36% | Botswana Stock Exchange (BSE) DCI Same 0 | NSX: MTC 7.75 SAME | Anirep 8.99 SAME | Capricorn Investment group 17.34 SAME | FirstRand Namibia Ltd 49 DOWN 0.50% | Letshego Holdings (Namibia) Ltd 4.1 UP 2.50% | Namibia Asset Management Ltd 0.7 SAME | Namibia Breweries Ltd 31.49 UP 0.03% | Nictus Holdings - Nam 2.22 SAME | Oryx Properties Ltd 12.1 UP 1.70% | Paratus Namibia Holdings 11.99 SAME | SBN Holdings 8.45 SAME | Trustco Group Holdings Ltd 0.48 SAME | B2Gold Corporation 47.34 DOWN 1.50% | Local Index closed 677.62 UP 0.12% | Overall Index closed 1534.6 DOWN 0.05% | Osino Resources Corp 19.47 DOWN 2.41% | Commodities: Gold US$ 2 225.29/OZ UP +1.58% | Copper US$ 3.99/lb UP +0.07% | Zinc US$ 2 455.50/T UP 0% | Brent Crude Oil US$ 87.57/BBP UP +1.36% | Platinum US$ 909.21/OZ UP +1.60% Sport results: Weather: Katima Mulilo: 19° | 37° Rundu: 17° | 33° Eenhana: 18° | 33° Oshakati: 20° | 31° Ruacana: 19° | 33° Tsumeb: 17° | 29° Otjiwarongo: 16° | 28° Omaruru: 18° | 31° Windhoek: 17° | 28° Gobabis: 17° | 28° Henties Bay: 16° | 19° Wind speed: 24km/h, Wind direction: S, Low tide: 10:54, High tide: 04:57, Low Tide: 22:58, High tide: 17:16 Swakopmund: 15° | 17° Wind speed: 29km/h, Wind direction: SW, Low tide: 10:52, High tide: 04:55, Low Tide: 22:56, High tide: 17:14 Walvis Bay: 16° | 22° Wind speed: 33km/h, Wind direction: SW, Low tide: 10:52, High tide: 04:54, Low Tide: 22:56, High tide: 17:13 Rehoboth: 18° | 29° Mariental: 22° | 32° Keetmanshoop: 21° | 34° Aranos: 21° | 31° Lüderitz: 15° | 29° Ariamsvlei: 23° | 34° Oranjemund: 15° | 21° Luanda: 27° | 30° Gaborone: 20° | 32° Lubumbashi: 17° | 24° Mbabane: 15° | 23° Maseru: 12° | 28° Antananarivo: 16° | 27° Lilongwe: 17° | 29° Maputo: 20° | 28° Windhoek: 17° | 28° Cape Town: 17° | 23° Durban: 21° | 25° Johannesburg: 18° | 28° Dar es Salaam: 26° | 32° Lusaka: 18° | 30° Harare: 15° | 31° Economic Indicators: Currency: GBP to NAD 23.85 | EUR to NAD 20.41 | CNY to NAD 2.62 | USD to NAD 18.93 | DZD to NAD 0.14 | AOA to NAD 0.02 | BWP to NAD 1.33 | EGP to NAD 0.39 | KES to NAD 0.14 | NGN to NAD 0.01 | ZMW to NAD 0.74 | ZWL to NAD 0.04 | BRL to NAD 3.8 | RUB to NAD 0.2 | INR to NAD 0.23 | USD to DZD 134.33 | USD to AOA 832.63 | USD to BWP 13.71 | USD to EGP 47.35 | USD to KES 130.98 | USD to NGN 1415.13 | USD to ZAR 18.93 | USD to ZMW 25.01 | USD to ZWL 321 | Stock Exchange: JSE All Share Index 74536 Up +0.85% | Namibian Stock Exchange (NSX) Overall Index 1528.69 Up +0.84% | Casablanca Stock Exchange (CSE) MASI 12986.94 Up +0.04% | Egyptian Exchange (EGX) 30 Index 27559.35 Down -2.36% | Botswana Stock Exchange (BSE) DCI Same 0 | NSX: MTC 7.75 SAME | Anirep 8.99 SAME | Capricorn Investment group 17.34 SAME | FirstRand Namibia Ltd 49 DOWN 0.50% | Letshego Holdings (Namibia) Ltd 4.1 UP 2.50% | Namibia Asset Management Ltd 0.7 SAME | Namibia Breweries Ltd 31.49 UP 0.03% | Nictus Holdings - Nam 2.22 SAME | Oryx Properties Ltd 12.1 UP 1.70% | Paratus Namibia Holdings 11.99 SAME | SBN Holdings 8.45 SAME | Trustco Group Holdings Ltd 0.48 SAME | B2Gold Corporation 47.34 DOWN 1.50% | Local Index closed 677.62 UP 0.12% | Overall Index closed 1534.6 DOWN 0.05% | Osino Resources Corp 19.47 DOWN 2.41% | Commodities: Gold US$ 2 225.29/OZ UP +1.58% | Copper US$ 3.99/lb UP +0.07% | Zinc US$ 2 455.50/T UP 0% | Brent Crude Oil US$ 87.57/BBP UP +1.36% | Platinum US$ 909.21/OZ UP +1.60%