Namibia’s government debt securities reached a record monthly issuance of N$2.22 billion in October, marking the highest for the FY2024/25, according to the Bank of Namibia’s latest Borrowing Plan.
Despite the surge, total government debt increased by a modest N$956 million following the redemption of the GC24 bond, resulting in a month-on-month growth of 0.8%.
“This was lower than the 1.73% increase recorded in September, despite the conduct of three bond auctions and five treasury bill auctions, which is more than typical for a month. By the end of October, Namibia’s domestic debt-to-GDP ratio stood at 45.1%, with total domestic debt reaching N$124.5 billion,” said Simonis Storm in its fixed income report for October 2024.
According to the firm, including foreign debt, the overall debt-to-GDP ratio expanded to 60.0%, reflecting the continued reliance on both domestic and international markets to meet funding needs.
On the monetary policy front, Simonis noted that the Monetary Policy Committee (MPC) enacted a second rate cut of the year, lowering Namibia’s repo rate to 7.25%.
“The initiation of a rate-cutting cycle signals potential reductions, positioning the government to capitalise on more favourable borrowing conditions, and potentially enhancing funding flexibility for critical infrastructure projects pivotal to Namibia’s long-term economic growth strategy,” said the firm.
Furthermore, the strengthening of the US dollar drove depreciation of the local currency, prompting an upward adjustment in the yield curve, mirroring shifts in South African bond yields, which serve as regional benchmarks.
Namibian bond yields rose by 31 basis points in October, yet bonds posted a 12.51% year-to-date return as of 31 October.
Long-duration bonds outperformed with a 15.97% return, benefiting from duration and higher coupons, while shorter-term bonds returned 8.59%.
“Namibian bonds also outpaced emerging markets, offering a 12.51% YTD return versus Bloomberg EM Bonds’ 6.39%, and maintained an 11-basis-point yield premium over South African bonds. Meanwhile, intermediate bonds like GC28 and GC30 showed weaker demand,” said SSS.
In October, treasury bill yields fell by 7 basis points, reflecting stable liquidity and shifting investor demand. Increased volumes at October bond auctions aimed to meet government funding needs, though early auctions were under-allocated, signalling cautious investor sentiment amid rising issuance.
In the secondary bond market, trading activity declined sharply, with monthly volumes dropping to N$34.5 million from September’s N$170.4 million.
Commercial banks in Namibia experienced a liquidity uptick in October, attributable to the GC24 bond redemption, which injected approximately N$1.27 billion back into the system and coupon disbursements.
“This liquidity surge was particularly pronounced on 15 October, when bank liquidity rose sharply to N$3.08 billion, marking a N$1.98 billion increase from the prior day’s levels due to the GC24 bond maturity and associated coupon payments,” noted the firm.
Average commercial bank liquidity in October was N$1.78 billion, up from September’s N$1.45 billion, underscoring the impact of bond redemptions and scheduled disbursements on systemic liquidity.
