R1.217 billion worth of Treasury Bills converted into Treasury Bonds in LMO Auction

July 20, 2021

As part of its effort to bring back its debt to a sustainable level, some R1.217 billion worth of Treasury Bills have been converted into Treasury Bonds.

The conversion which is technically called a Liability Management Operation (LMO) was launched on 7th July and closed on 14th July.

Investors, which included commercial banks, converted their Treasury Bills which are short term, into Treasury Bonds, which are long term.

The operation was targeting Treasury Bills of 182 days and 365 days, which were expected to mature between 01st August 2021 and 31st July 2022.

The T-Bills were exchanged and converted into T-Bonds of three, five and seven years.

During the operation, R462 million of T-Bills were converted in three year T-Bonds, R398 million converted into five year T-Bonds and R358 million converted into seven year T-Bonds.

Speaking to the media yesterday, the Chief Debt Analysts at the Ministry of Finance, Economic Planning and Trade, Dick Labonte, explained that the operation is a tool which Government can use to reduce its debt level.

“The LMO is part of the Government’s economic reform programme which is being supported by the IMF to try and put our debt back on a sustainable level. The COVID 19 pandemic has impacted on the government’s debt, as by the end of 2020, it had reached 100% to GDP, as compared to 57% at the end of 2019.”

Mr. Labonte noted that issuing a lot of T-Bills comes with its own roll-over risks, as the Government has to continuously reissue T-Bills to repay those ones maturing.

“As T-Bills have short term maturity dates, a year or less, they do have an impact on the sustainability of our debts.”

Mr. Labonte, said that the Liability Management Operation has attained its target of converting some R1.217 billion T-Bills into T-Bonds.

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