Investment Opportunities

The public is given a 7-day notice (28 days for bonds) of the Central Bank of Lesotho's intention to auction Treasury bills/bonds. Bids must be submitted physically to the Bank or remotely through the CSD before the deadline stated in the auction announcement.

Instructions for bidding in the auction

• The minimum bid volume is LSL 5,000 and bids must be in multiples of LSL 100.
• Separate bid forms should be completed for each tenor (e.g. 91, 182, 273, and/or 364 days).

Auction Categories

There are two categories of investors or bids during auctions:

• Competitive investors: their bids exceed LSL 100,000. They are considered auction price makers.
• Non-competitive investors: Their bids range from LSL 5,000 to LSL 99,900. They are considered auction price takers.

Bidding

All bids, competitive and non-competitive, must be submitted to the Central Bank. All bids are captured on the Central Securities Depository System (CSD) for participation in the auction. The Central Bank of Lesotho will accept a maximum of four bids in the competitive category and only one bid in the non-competitive category. All bidders (competitive and non-competitive) are awarded at the auction’s accepted lowest yield, corresponding to the highest price per 100, using a single-price auction system. This means that all successful bidders pay at a uniform price.

The Bank reserves the right to accept or reject all or any portion of any or all bids if it deems it necessary in the interest of maintaining stable rates in the financial market. Bids may also be rejected if the auction rules stipulated above are breached and/or a bid is deemed an outlier.

The auction is conducted at the Central Bank of Lesotho premises on the auction day (usually Wednesday at 09:30 am); there is no need for the presence of any investor to witness the auction.

The Central Bank of Lesotho follows a T+0 settlement arrangement, meaning all successful bids are settled on the same day of the auction. This is done by directly debiting the commercial settlement banks' accounts held at the Central Bank for the value of the securities or investments purchased. It is important for successful bidders to ensure that their accounts are adequately funded on settlement day to meet their obligations. If a bidder fails to fully pay for Treasury Bills on settlement day, the CBL may exclude them from participating in subsequent auctions for six months at its discretion. Additionally, the CBL reserves the right to cancel or take up any Treasury Bills that are not fully paid for by a successful bidder on settlement day.

The securities are issued electronically in a de-materialized form, meaning no physical certificates are issued to treasury bills and bondholders. Investors can request their CSD statement of holdings or award advice after every transaction, on a monthly basis, or at any time.

The auction results are publicly announced on the Bank's website and through other electronic media at 11:00 hours on the auction day. Successful bidders can collect the award advice from the Bank on the following day. The auction results include the total amount on offer, the total amount of bids received, the total amount of accepted bids, the cut-off yield or price, and the range of successful yields.

Investors can use their securities as collateral for borrowing from third parties, if the loan matures before the securities used as collateral.

Withholding Tax is payable on interest income earned from the investment at maturity or on a coupon payment date. The tax is deducted at the source upon maturity, making the income net of withholding tax. The rates are 10% for residents and 15% for non-residents.

The Central Bank of Lesotho is prepared to buy treasury securities from investors as long as the purchase occurs at least five (5) working days before the securities mature. The Bank offers a rediscounting facility, but can only repurchase the treasury securities if 75% of the maturity period has elapsed.

Upon maturity, the proceeds (principal and interest) of treasury bills are deposited into the investor’s account held at a commercial bank. For treasury bonds, coupon payments are made semi-annually until the investment matures, after which the principal is paid back to the investor. If an investor wants to continue investing, a new application must be completed for reinvestment.

Secondary market trading of treasury securities issued in the primary market is conducted over the counter. Holders of such securities can trade them with any counterpart in the market at mutually agreed prices. Ownership changes are effected by both parties in a transaction upon completion of form CBL/TBR/2. On the day of the transaction, both the buyer and the seller, or their authorized representatives, should be present at the Bank to complete the transaction. The Central Bank must be informed of any secondary market trades between participants.

Contact: registry@centralbank.co.ls/22232143/2103.