Interfin issues $7m agro-bills

prescribed asset and liquid asset status.
The long-term paper was offered in multiples of $10 000 with an interest rate to be determined on a tender basis.
As a result of the liquid asset status, holders of the bills, especially banks, can access overnight accommodation from the Reserve Bank of Zimbabwe to cover their positions so that they can meet their financial obligations, while prescribed assets were meant to attract institutional investors like pension funds and insurance companies.
This is because pension funds and insurance firms are required to hold a certain percentage of their portfolios in Government bonds.
Since the introduction of the multi-currency system in 2009, the financial sector has faced liquidity challenges with transitory deposits (90,1 percent as of June 2011) making the bulk of the bank deposits as the banking public prefer not to bank their money due to lack of confidence in the banking sector.
Commenting on the issuance of agro-bills, Kingdom Financial Holdings Limited (KFHL) said because of liquidity crunch on the market bank deposits remained low.
“This (liquidity crisis) explains why banks have been unable to extend meaningful credit beyond 90 days as they have to be matched with deposits. As a result, investors prefer short-term investments with high interest rates. The long-term paper will continue to receive lukewarm response from investors as long as the liquidity situation does not improve,” said KFHL.
In the last quarter of 2011, Agricultural Marketing Authority and CBZ agro-bills were on the market to raise $20 million to finance soya bean production and $100 million to close funding gaps in the 2011/12 farming season.
The previous bills (by AMA and CBZ) were undersubscribed as investors went for high interest rates, which the issuers were not prepared to pay given the fact that they are long-term paper.
The bids suffered setbacks after investors’ lukewarm response as the first tender raised $4,5 million against the targeted $20 million, while the first batch of $100 million bills raised a paltry $17 million of the targeted $50 million.
The bids rate was as high as 19,75 percent with the lowest at 10 percent.
The average weighted rate of the allotment was 11,27 percent, which fell way below the 90-day investment rate average of around 18 percent, resulting in investors preferring short-term investments with high interest rates.