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Who can invest in the Government of Lesotho securities?

The Government of Lesotho securities market is open to all investors; institutional and retail. The following are the main categories of the main investors frequently observed in the market.

  • Commercial banks
  • Insurance companies
  • Private Companies
  • Pension Funds
  • Stock Brokers
  • Asset / Fund Managers
  • Individuals (18 years and above)
What are the advantages of investing in Government securities?
  • They offer a competitive rate of return
  • They are risk-free instruments
  • They are very liquid; and can easily be sold in the secondary market at competitive prices
  • They can be pledged as collateral for borrowing
  • A good saving mechanism
Requirements for Investing

Retail Investors

Individuals

  • Investor’s identification (National ID or Travel’s Passport)
  • A bank account held at any local commercial bank

Societies

  • Certificate of Registration
  • Society’s Constitution
  • Resolution by members to invest
  • Bank account confirmation letter
  • Certified copies of 3 Signatories’ IDs

Institutional Investors

Companies

  • Certificate of Incorporation / Trader’s License
  • Bank Account Confirmation Letter
  • Certified copies of 3 Signatories’ IDs
Investment Procedures
There are two ways how investors can participate in the Government Securities market, namely, through the primary market auctions (per Auction Calendar frequency on the CBL website) and/or through the secondary market which is available any working day. All investors wishing to participate in the treasury bills/bonds transactions must be registered on the CSD. An investor registers by filling out the Registration Form (CBL/TBR/0) available at the Bank.
Auction Process

In line with the annual auction calendar on the website, the public is given a 7-day (28 days for bonds) notice of CBL’s intention to auction Treasury bills/bonds via electronic media (Bank’s website, social platforms, email to the main market participants) and/or through print media (local newspapers). All bids must be submitted physically to the Bank or remotely through the CSD before the deadline stated in the auction announcement. Late applications will not be accepted. The minimum bid volume is LSL 5,000. 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.

There are two categories of investors or bids during auctions:

  • Competitive investors

Investors whose bids exceed LSL 100, 000. These are auction price makers.

  • Non-competitive investors

Investors whose bids range from LSL 5,000 to LSL 99,900. |These are auction price takers.

All bids, competitive and non-competitive, must be submitted to the Central Bank. The latter on behalf of clients captures bids on the Central Securities Depository System. The Bank shall 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). The auctions will be conducted using a single price auction system, where 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 to be an outlier. The auction is conducted at the Central Bank of Lesotho premises on the auction day (usually Wednesday at 09:30am); there is no need for the presence of any investor to witness the auction.

Settlement

Central Bank of Lesotho applies a T+0 settlement arrangement. All successful bids are settled on the same (auction) day by directly debiting the commercial settlement banks’ accounts held at the Central Bank for the value of the securities/investments purchased. Successful bidders must ensure that their accounts are sufficiently funded on settlement day to meet the settlement obligations arising from participation in the auction. Where a bidder fails to pay fully for Treasury Bills on settlement day, the CBL may, at its discretion, exclude that bidder from participating in subsequent auction(s) for a period of six months. 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-materialised form (there are no physical certificates issued to treasury bills and bond holders).  Investors can request their CSD statement of holdings / award advice after every transaction, on a monthly basis and are available on demand.

Auction Results

The auction results are announced publicly on the Bank’s website and through other electronic media at 11:00hrs 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 / price
  • The range of successful yields