Putting Bonds on the Internet

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By Wezi Tjaronda WINDHOEK In a bid to ensure that Namibia has an efficient and transparent bond market regarding pricing transparency in Government, parastatals and corporate entities, last week saw the launch of an interactive bond webpage. The website, an electronic forum for market participants to indicate their intentions to transact and obtain information about current market activities in all bonds, has been sponsored by the Bank of Namibia and hosted by the Namibian Stock Exchange. On this site, market participants can find the latest bonds being traded, report their deals, and indicate their intention to buy and/or sell a bond, find out parties who want to sell or buy as well as obtain statistics on the bond market as submitted. The website, www.nambonds.com, is a forum for interaction by participants in the bond market and has already been introduced to market participants. Finance Deputy Minister Tjekero Tweya, who launched the site, said it was a major development in the local financial market and would ensure that lack of transparency and market information in the bonds market would be a thing of the past. Previous experience with sporadic secondary trading provoked the idea of an interactive web site according to Tweya. He said although most of the bonds issued in 1998 were later consolidated into three major bonds maturing in 2002, 2005 and 2010 followed by secondary market auctions, success was limited. The website seeks to improve the transparency and liquidity of the bond market, attracting foreign players to the Namibian bond market and enabling financial institutions to meet their reporting requirements in line with international standards. Other expected outcomes of the new development are to provide accurate and timely information to researchers and analysts in the bond markets and also to create an informal market place. Tweya said the launch of the site for bonds marked a breakthrough in the development of the local market because of its non-existence during the pre-independence era. “The bond market in Namibia was virtually non-existent and the financial system was dominated by urban-based commercial banks and insurance and pension funds that mobilized deposits and contractual savings that were hardly put into productive use in Namibia’s real sector but were rather directed to investments in the South African economy,” he said. The government and players in the bond market have teamed up to develop the local bond market in order to help in the development and growth of the local economy with the specific aim of developing the bond market would be to ensure continuous access to funds in the market at affordable prices to develop the real economy. The first Namibian bonds were issued in 1992 and Tweya added that the specific objectives of issuing government debt are to provide the government with an avenue to fund its capital budget and execute its debt management strategy in the local bond market with greater flexibility and lowest costs and also to diversify investor and issuer and achieve overall market stability. The interest bearing securities issued in the Namibia capital market are government’s Internal Registered Stocks and debentures issued by parastatals such as AgriBank, Road Fund Administration, National Housing Enterprise and Air Namibia. Some of the challenges that lie ahead are lack of liquidity, transparency and secondary market trading activity. This, said Tweya, inhibits price discovery and transparency on secondary market information, which adversely affects all stakeholders in the market for domestic government debt securities like government, banking institutions, asset managers, stockbrokers, individuals and corporate entities.