- The application date for the treasury bills has been scheduled for October 12, 2023
- Corporate entities are required to submit a minimum amount of US$50,000 as part of their treasury bill application
- The interest rate for the treasury bills will be determined through an open tender process
Harare- The government has issued US$5 million worth of treasury bills (TBs) with a maturity yield of 90 days. These TBs are specifically intended for government programs and managing cashflow.
As per a circular issued today by the Reserve Bank of Zimbabwe, interested parties are required to submit applications for a minimum amount of US$50,000 if they are financial institutions or corporates, and a minimum amount of US$5,000 if they are individuals.
Corporates and individuals can participate in non-competitive bids for the treasury bills through banks. Each financial institution is allowed to submit a maximum of two bids.
“Copies of the apllications are available at banks and RBZ local dealers”, read the statement.
“Applications should be clearly marked Zimbabwe Government 90-Day USD Treasury Bills”
The interest rate for the treasury bills will be determined through an open tender process based on yield.
In an open tender process based on yield, potential buyers of the treasury bills will submit their bids indicating the yield at which they are willing to purchase the bills. The yield represents the interest rate that the buyer expects to earn from holding the treasury bills.
During the open tender, the bids will be evaluated, and the interest rates offered by the bidders will be taken into consideration. The treasury bills will be allocated to the highest bidders, starting from the lowest yield offered, until the total amount of US$5 million is reached.
Essentially, this means that the interest rate for the treasury bills will be determined by the market through the competitive bidding process, with buyers indicating the yield they are willing to accept. The government will then allocate the bills to the bidders based on their yield offers.
The offer for the treasury bills will open on the 12th of October at 8:00 am and close on the same day at 12:00 pm (noon). Allotments, which refer to the allocation of the treasury bills to successful bidders, will be made on the same day as the closing of the offer. Payment for the allotted treasury bills will be due on the following day, which is the 13th of October.
The treasury bills being issued have several special features. First, they have prescribed asset status, which means that certain institutions, such as pension funds or insurance companies, may be required to hold a certain percentage of their assets in treasury bills.
Secondly, the treasury bills have liquid asset status, meaning they are considered highly marketable and can be easily converted into cash.
Also, the treasury bills are tradable, allowing investors to buy or sell them on the secondary market before their maturity date.
Furthermore, these treasury bills come with tax exemption, which means that the interest earned on them may be exempt from certain taxes and the RBZ accepts these treasury bills as collateral for overnight accommodation, which refers to short-term borrowing by financial institutions from the central bank.
Finally, the allotment of the treasury bills will be based on the weighted average rate, which takes into account the different yield offers made by the bidders.
Treasury bills are government-issued securities used to raise funds for various government purposes. They offer certain features and benefits that make them attractive to investors and institutions.
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