BoZ opens Govt securities market to all investors

By BUUMBA CHIMBULU

THE Bank of Zambia (BoZ) has clarified that all individuals, businesses, institutions and foreign investors are eligible to invest in Government securities, provided they meet basic account registration requirements.

In its “Investing in Government Securities: Frequently Asked Questions” guide, the central bank said there are no restrictions on who can buy Treasury bills and Government bonds issued by the State.

“There are no restrictions to eligibility. Business firms, institutions, foreign entities and individuals are all eligible to purchase Government securities at the Bank of Zambia,” it said.

However, BoZ said investors must hold a Kwacha-denominated account with a local commercial bank and be registered on the Central Securities Depository maintained by the central bank.

It explained that Government securities are issued in two categories: Treasury bills and Government bonds.

According to BoZ, Treasury bills were short-term debt instruments with maturities of 91, 182, 273 and 364 days.

They were sold below their face value, enabling investors to earn a return when the Government repays the full face value at maturity.

“Government bonds, on the other hand, are designed for long-term investment and are available in maturities ranging from two to 15 years,” BoZ stated.

It said bonds may be bought at a discount, at par value or at a premium, depending on market conditions.

In addition to repayment of the principal amount at maturity, bondholders receive fixed interest payments, known as coupons, every six months throughout the life of the investment.

BoZ also explained how interest rates on Government securities were determined through competitive and non-competitive bidding.

“Under competitive bidding, investors submit bids indicating the interest rates they are willing to accept,” it added.

The bank ranks bids from the lowest to the highest interest rate and allocates securities until the amount on offer is fully subscribed, with all successful bidders receiving the same final interest rate.

For investors choosing the non-competitive bidding option, it said they automatically accept the interest rate determined through the competitive bidding process.

The central bank said Government securities offered an opportunity for investors to earn predictable returns while providing financing for Government operations and development programmes.

Ends