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SEC attributes decline in Q4 bond trades to delayed debt restructuring process

• One of the challenges is to do with the delays in finalizing the debt restructuring process.
• Reduction in the bond trading could just be investors responding to those adverse conditions on the market especially on the exchange rate side.
• If the investors feel that the exchange rate is still volatile, they sort of hold back their investment.

Securities and Exchange Commission (SEC) has attributed the 19 percent decline in Government bonds trading in the fourth quarter of 2023 to the delays in finalizing the country’s debt restructuring process.
Speaking to Money FM News, Commission Director-Market Supervision and Development, Nonde Sichilima said other contributing factors include adverse macro-economic indicators such as the volatility of the exchange rate and high interest rates.
Mr. Nonde noted that the reduction in the bond trading could just be foreign investors responding to the adverse conditions that on the market because most of tend to hold back their investment when the exchange is not stable.
“Challenges that we faced as a country and one of them is to do with the delays in finalizing the debt restructuring process. We also had other macro-economic activities playing against us one of them is the exchange rate and interest rates going up. So the reduction in the bond trading could just be investors responding to those adverse conditions that we are seeing on the market.”
“So we tend to see this especially on the exchange rate side. If the investors feel that the exchange rate is still volatile, then they sort of hold back because they are not sure how they are going to preserve their capital once they send their money in US dollars and then the next day the exchange rate moves against them. So it’s really just investors’ response to what they are seeing on the ground,” Mr. Nonde stated.
He added that if there is a positive development in the economy like recent announcement about the Mopani deal, there is an increase in participation in government bonds, as investors react to what they term as good news for their investment.
“What we tend to see is that if there is a positive development, like recently government announced the Mopani deal and various other things, you tend to see an upsurge so it’s just investors reacting to what they are terming as good news for their investment so we tend to see a more positive movement,” he added.
In the fourth quarter of 2023, the market for Government bonds recorded 1, 756 trades, which is 19 percent lower than in the previous quarter where there 2, 181 trades, but 22 percent higher than 2022.
According to SEC, the nominal value of bonds that traded in quarter 4 of 2023 was K18.6 billion which is 46 percent lower than quarter 3 of 2023where the nominal value for bonds that traded was K34.61 billion, 2022 percent higher than 2022.
On the other hand, the total market value for bond trades in the secondary market during quarter 4 of 2023 was K13.80 billion in comparison to K23.61 billion, representing a 42 percent decline and from last year, this was 25 percent higher than 2022.

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