ZIMBABWE’S bond market is battling to ride out a sea of headwinds, which a market leader this week attributed to monetary policy constraints, inflation concerns and a scarcity of new listings.
Mehluli Mpofu, chairperson of the Bond Market Association of Zimbabwe (BMAZ), said these factors had stifled bond market growth and investment.
He said an already constrained fixed-income space suffered further setbacks after the Reserve Bank of Zimbabwe tightened its monetary policy framework in September 2024, which squeezed liquidity out of the market.
The bond market is one of the most lucrative markets, with its value standing at US$141,34 trillion globally in 2024, and is expected to reach US$166,81 trillion by 2030, with a compound annual growth rate of 2,8% during the forecast period.
The bond market, segmented by issuer, type and sector, plays a pivotal role in the global financial landscape, offering investment options for diverse risk appetites and financial goals.
“We have not seen any new listings, while concerns remain around inflation and, therefore, associated pricing to realise real returns,” Mpofu told the Zimbabwe Independent in an interview.
“Furthermore, there has not been a public auction of Treasury Bills, which has made it difficult for price discovery and the establishment of a yield curve. We are aware that there is a secondary market, with over-the-counter trading on a bilateral basis. Therefore, the bond market has been constrained over the last few years due to the factors mentioned above.”
Currently, there is only Karo Bond listed on the Victoria Falls Stock Exchange (VFEX), which raised US$36,8 million.
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“This is the first and only listed debt on the VFEX, and we are hopeful to see more listings as the environment stabilises,” he said, adding that there were other government bond instruments which have not been listed.
The market, according to Mpofu, is dominated by government bonds, with some activity for corporate bonds and commercial paper. A growing universe of such instruments provides investors with options to choose those that meet their risk appetite, he noted.
The bonds’ exposure to the asset management sector declined to 4,97% in the third quarter of 2024 from 5,38% recorded in the prior quarter, according to the Securities and Exchange Commission of Zimbabwe.
It said the asset management sector’s exposure to the stock market increased to 40,53% from 37,21% recorded in the prior quarter.
This was attributable to the general increase in stock prices during the quarter as evidenced by a 90,25% increase in the Zimbabwe Stock Exchange All-Share Index.
Total funds under management (FUM) stood at ZiG92,84 billion, representing a 99,64% increase compared to the previous quarter. The total FUM included USD-denominated FUM of US$1,76 billion, which were translated to local currency at the prevailing exchange rate.
The industry average FUM for the period under review stood at ZiG3,20 billion.
- Exchange rate as at September 30, 2024: US$1:ZiG24,9.
