Oman’s Govt. Bond Witnesses High Demand
Published Wednesday, 20 June 2012 11:31 | Written by Amwal Al Ghad
The apex bank received RO209.38 million in bids for the bonds, with an average yield of 4.5 per cent.
According to bankers, the good response from institutions indicates the ample liquidity within the financial system and appetite for safe avenues of investment among institutional investors. "Also, due to some regulatory requirement, insurance companies and pension funds subscribe to the bond issue as part of their portfolio investment,” said Sankar Kailasam, senior vice-president of Gulf Baader Capital Markets.”There is always an appetite for government bonds.”
The ten-year bond carries a coupon rate of 5.5 per cent per annum. The highest bid was for a yield of 5.05 per cent and the lowest for 3.75 per cent, CBO said in a statement.
Kailasam said banks subscribe to government bonds for economic reasons, as they can adjust investments in bonds for their cash reserve ratio requirements. Unlike keeping the interest free funds with the apex bank, investment in government bonds fetches returns.
Related newsMarket experts said generally development bonds get good response due to lack of availability of such instruments in the market. It is not clear whether CBO will come out with another bond issue this year as government does not need to raise domestic debt to meet budget deficit. However, development bonds worth RO40 million will mature in August this year.
The bonds are direct and unconditional obligations of the government, which can be used as a collateral security to obtain loans from any local licensed bank.
The development bond will be listed on the Muscat Securities Market (MSM) soon, which ensures liquidity of the instrument.
According to market officials, the trading of government development bonds on the bourse is limited, mainly due to lack of interest among investing banks and other high net worth individuals. Investors generally prefer to hold bonds in view of high yield and security.
Market officials said the Central Bank of Oman may think of issuing sukuks (sharia compliant debt instruments) next year, with the government opening up the financial sector for Islamic finance.
Also, market official said that there is a need for more and more government bond issues to have a benchmark interest rate, which helps banks to determine their interest rates for different instruments, Times of Oman reported.
The Market Quotes Powered By Forexpros, the Forex, Futures, and Stock Markets Portal.