What Are Government Treasury Bills (T-bills)?
These are short-term money market debt instruments considered to have the lowest risk within the domestic market (ranging from 91, 182, 273 and 364 days) issued by the Central Bank of Eswatini on behalf of the Government of Eswatini. T-Bills are issued through a competitive bidding process at a discount from par, which translates to prepaid interest. The minimum bid for competitive bidders is five million emalangeni (SZL5, 000,000.00), thereafter in multiples of five million emalangeni (SZL5, 000,000.00). Investors who are not able to bid competitively i.e. non-competitive bidders assume the weighted average discount rate from the accepted bids by competitive bidders. The minimum bid for the non- competitive bidders is ten thousand emalangeni (SZL10, 000.00) and thereafter in multiples of ten thousand emalangeni (SZL10, 000.00).
Why Issue Treasury Bills?
The Government of Eswatini, like other governments, issues T-bills to raise money needed to pay its short term budgetary expenses. While Government also finances its operations through taxation and levies, sometimes the timing in the receipt of these revenues does not match with the timing of government’s obligatory payments. To finance the difference between the expenditure and the revenue (i.e. deficit) the Government borrows by issuing securities. The Government also issues T-bills in order to develop the domestic money market as they provide additional investment avenues for both institutional and individual investors.
The Auction and the Auction Process
Treasury Bills auctions are announced in a week in advance and bidding is open until 11:00 Hrs, Wednesdays. Bids may be submitted directly to the Central Bank’s Domestic Debt Unit or through Primary Dealers.
Treasury securities auctions are open to all bidders, including commercial banks, non- banking financial institutions, and stockbrokers, corporate and individual investors. Authorized Primary Dealers may also submit bids on behalf of their customers. These Primary Dealers may bid competitively for their own account and clients and may also submit non-competitive bids on behalf of their clients. Individuals bidding non-competitively.
The announcement auction results are announced publicly on the Bank’s website and through electronic media.
Successful bidders are notified by phone, fax or email normally by 15:00 hrs on the day of the auction. The auction results include:
- The total amount of bids received;
- The total amount of accepted bids; and
- The lowest and average discount rate of accepted bids.
Types of Treasury Bills
The Central Bank on behalf of the Government of Eswatini issues treasury bills on a weekly basis. This is a short dated paper maturing in ninety one days. They are open for sale to commercial banks, companies, non bank financial institutions, stockbrokers, corporate and individual investors (farmers, shops, churches, man on the street, etc.). They are offered as competitive bids and non competitive bids; competitive bids have a minimum of E5 million there after applications can be made in multiples of E1 million.
For non competitive bids where individuals can make applications the minimum amount is only E10, 000 or more in multiples of a thousand. This can be done through primary dealers namely, First National Bank, Standard Bank of Eswatini Limited, Nedbank (Eswatini) Limited, Eswatini Development and Savings bank (Swazi bank). Auctions are normally on Wednesdays for settlement at T+2 normally Friday. Results are shown on the Reuters page (SWAT) immediately after lunch of the auction day and local newspapers the following day after the auction day.