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Investors jostle for housing bills

Dumisani Ndlela

INVESTORS last week jostled for $500 million housing bills, with dealers saying interest in the money market instrument had been bolstered by the bills’ prescribed asset status.

Government floated the housing bills last week to raise

cash to finance the construction of houses for public servants.

The housing bills were oversubscribed, with a total allotment of $845,1 million at an average rate of 199,4% out of the floated $500 million.

Bids amounting to $4,9 billion were far higher than the amount on offer, indicating overwhelming interest from the market.

“There is a shortage of prescribed assets,” a dealer said this week, explaining the reason for the huge interest. “It’s mainly the pension funds and insurance companies as well as market makers hoping to sell the instruments later.”

Pension and insurance firms are compelled by law to have a certain portion of their portfolios in prescribed assets.

The housing bills, issued through Genesis Investment Bank, were issued by government in partnership with the private sector through the Public Private Partnership.

The partners have established the Public Servants Housing Development Company (PSHDC), a Special Purpose Vehicle (SPV) to mobilise the appropriate financial and technical resources for the development of houses for public servants.

The bills have a prescribed asset status, irrevocable Government of Zimbabwe guarantee and are tradable on the secondary market.

They also have a tax-exempt status granted by the Ministry of Finance.

Indications had earlier been that the bills were a risky investment, with analysts predicting poor take-up by the market.

The huge interest in the bills was therefore surprising.

The fear had been that government, battling serious cash constraints, could default on repayments on maturity of the bills, forcing it to roll them over.

“This can lead to liquidity risk for investors,” a banking sector analyst said.

Dealers said a liquid market had also bolstered the prospects for success of the housing bills tender, but discounted this as the major factor in the overwhelming support level.

“Yes, the high liquidity position on the market during the week was a factor, but I wouldn’t give that a higher weighting; it’s the appetite for prescribed assets,” a dealer told businessdigest.

The market remained vastly liquid last week, but dealers said the liquidity situation had significantly increased on Thursday due to the maturing of the non-negotiable seven-day paper that would have been rolled over the previous week.

As a result, liquidity that averaged $5 billion during the first four days of the week shot up to $27,8 billion on Thursday and closed less liquid at $7,6 billion as the money was rolled over again, an analyst with Kingdom Stockbrokers said.

“We expect the same trend to happen every week with Mondays closing tighter due to statutory reserve payments and becoming easier as the week progresses until Thursday and the cycle starts again.”

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