Where to place your investment bets in 2017

Treasury Bills

Unlike in stable economies where TBs hold the confidence of the markets as a risk free asset because of their backing by government, Zimbabwe has been struggling with its finances, which makes the risk of buying its paper very high. As such the informal market for the TBs pose more risk than investment opportunities for prudent investors.

There is a growing informal market for Treasury Bills (TBs) in Zimbabwe where some traders are discounting the government paper.

Treasury Bills (TBs) discounts are ranging around 15 percent for 2017 maturities and 20-25 percent for 2018 maturities, with smaller quantities attracting higher discount rates. This has presented opportunities for some investors who choose to hold the paper and receive the principal and interest payments from these TBs.

However, some analysts have argued that the government has in the past year failed to honour the payments and has been rolling over the maturing TBs to allow it more time to raise funding. There is a scenario where the government is paying for some maturing TBs using money raised from the newly issued TBs, they add.

Nonetheless TBs appear to offer a better option for financial institutions, in particular banks who are taking up TBs as an alternative to individual or corporate customers given the level of non-performing loans.

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