Financial markets anticipate borrowing plan

The financial markets and investors are anticipating the government’s borrowing plan, that will serve as a crucial factor in guiding investors on how to structure their bids.

Understanding the government’s borrowing intentions will help investors make informed decisions regarding their portfolio allocations and investment strategies, Simonis Storm Securities noted that.

During April, there was noticeable competitive demand for Treasury Bills (TBs), particularly concentrated at the short and long ends of the yield curve. The 91-day and 364-day notes attracted the most significant portion of tendered amounts, indicating investor preference for short-term liquidity and longer-term stability.

Despite this concentration, Namibian yields remained competitive in comparison to its South African counterparts, Simonis said. This competitive yield environment offers investors flexibility and the opportunity to allocate investments based on their risk appetite and investment horizon, it said.

Simonis said an upward shift in the yield curve over the past three months was observed. This shift is characterized by increases in yields across all maturity segments.

“Specifically, yields on shorter-term bonds (less than 5 years) have risen by an average of 33,7 basis points (bps), indicating increased investor demand for shorter-duration assets or potentially higher perceived risks in the long term. In the intermediate segment (5-15 years), yields have surged by 84.4 bps, suggesting a significant increase in investor expectations for inflation or economic growth over the medium term. Similarly, the longer end of the curve (15 years and beyond) has experienced a rise of 53.7 bps, indicating higher yields on longer-duration bonds,” Simonis said.

In April, the total annualized holding period return averaged 3,5%, which includes total performance data, including coupons. Simonis said this data reveals that a bullet investment strategy would have detracted from, rather than benefited, an investor.

“This reaffirms our previous warnings to exercise caution when investing in the local economy. The existence of alternative theories, often weighing-in heavier, than the simple unbiased expectations theory.”

Simonis said data shows that there is a strong appetite for investment and ample liquidity within the Namibian market, which it said indicates favorable conditions for investors, potentially leading to increased participation and trading activity.

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