GOVT OUTSTANDING BONDS RISE

MBABANE – A notable increase.  Total government outstanding bonds as at the end of the second quarter of 2020 (June 30) increased by 3.47 per cent to E5.07billion. This was against the E4.9 billion as at the end of the first quarter of this year. 

Outstanding bonds are those that have been purchased by an investor and have not yet been paid back by government to the purchaser. Any portion of bonds that are not yet paid back would be considered outstanding until they are paid in full, with interest.

According to the Eswatini Stock Exchange (ESE) 2020 second quarter report, year-on-year, total government bonds outstanding increased by 61.99 per cent from E3.13 billion as at June 2019.  

expansion

During the period under review, government through the Central Bank of Eswatini (CBE) listed 26 bonds with different maturities, ranging from three, five, seven, eight, nine and 10 years.

Government and corporations usually issue bonds as a way to gain capital for buying equipment, funding expansion, and paying off other debt. By issuing debt, governments can avoid hiking taxes or cutting other areas of spending in the budget each time they need additional funds for a project.

 “One bond commenced trading and three reopened during the period under review,” reported ESE.

When it comes to corporate bonds, the second quarter of 2020 realised nine new note issuances ranging between E20 million and E60 million.

At least eight bonds, on the other hand, matured during the quarter under review and they ranged between E10 and E50 million. This saw the cumulative corporate bonds outstanding as at June 30, 2020 increasing to E1.25 billion.  

bonds

The previous quarter’s outstanding amount was E1.14 billion. This marked a 9.65 per cent increase in total corporate bonds outstanding. However, year-on-year, total corporate bonds outstanding decreased by 2.34 per cent from E1.28 billion.

A corporate bond is a type of debt security that is issued by a firm and sold to investors. The company gets the capital it needs and in return the investor is paid a pre-established number of interest payments at either a fixed or variable interest rate. When the bond expires, or ‘reaches maturity,’ the payments cease and the original investment is returned.

The backing for the bond is generally the ability of the company to repay, which depends on its prospects for future revenues and profitability. In some cases, the company’s physical assets may be used as collateral. 

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