Paul Nyakazeya, Group Digital Editor 
LOCAL investors continue to shun government securities with low yields due to rising inflation, market experts have said.
A fortnight ago, the Reserve Bank of Zimbabwe (RBZ)’s plans to raise $500 million to fund Covid-19 pandemic expenditure hit a snag after it got total bids amounting to $170 million, and only allotted $70 million for the 270-day paper.
Economist Brains Muchemwa attributed the poor subscription of Treasury Bills (TBs) to a widening gap between the government and market inflation forecasts.
“Investors in fixed incomes securities are rejecting yields being offered by a conservative state when the inflationary pressure on the ground are suggesting otherwise,” he said, adding that subscription in government-issued paper will remain very low “as the same assets have led to massive erosion of value over the last three years.”
Zimbabwe’s annual inflation retreated slightly to 737 percent in June, but continues to create value preservation problems for investors.
Chris Mugaga, the Zimbabwe National Chamber of Commerce chief executive, told The Financial Gazette that rising inflation, which is wiping investments at a disturbing rate, was significantly contributing to fading of TBs appetite.
“The yield or return profile in an inflationary environment like we have has made the paper unattractive. Also the tenor given the long view profiles which are certainly far from attractive,” he said.
Renowned economist John Robertson said he was surprised that there were takers for the TBs considering that official inflation was nearing 1 000 percent.
“Government has not permitted sales to anyone wanting more than 20 percent per annum return as inflation is close to 800 percent, this is a ridiculously low rate of return. I am surprised they sold any,” he told The Financial Gazette.
Last year, financial institutions were increasing capital allocation towards investment securities, particularly TBs, after controlled lending rates and other factors had exerted significant pressure on their interest margins.
Eddie Cross, a member of the Reserve Bank of Zimbabwe monetary policy committee, said apart from high inflation cash shortages were impacting uptake of government bonds.
“The market has no liquidity. Everyone is short of Real Time Gross Settlement (RTGS). The new Open Market Operations bills are much more attractive and might attract more demand,” he said.
Responding to questions from The Financial Gazette last week, RBZ governor John Mangudya said the lack of participation shows that “there was no appetite for the offers”.
The central bank said it rejected bids for the 364-day tranche, amounting to $50 million, which were attached to a 50 percent return yield. It also rejected bids for the 270-day tranche totaling another $50 million, which came with yield demands of up to 45 percent.
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