Credit spreads on Zambia’s dollar bonds ‘blow out’ to all time highs as global sentiment dims

Credit default spreads on dollar bonds for Africa’s second largest copper producer Zambia widened over 2,500-4,000 basis points as global sentiment, exacerbated by COVID-19 pandemic, dims. 

Asset- sell off pressure in emerging and frontier markets remains high as demand for safer haven bets soars in the wake of uncertainty around how far COVID-19 will ravage justifications outside China. 

Stock futures are in red on Wall Street and in Asian trading prompting central bank intervention from the US Federal Reserve of New York has just announced a massive liquidity package of over $4trillion in the repo market to help calm virus-related disruptions in Treasury markets.

Zambian international bonds maturing 2022 last paid 42.8496% while the 2024 and 2027 were last roll priced at 35.7847% and 25.9727% respectively. This is the highest Eurobonds for emerging markets have ever peaked. 

Zambia’s dollar bonds are now priced close to local currency paper which ranges between 30.95% for the 10 year to 33% for the 5 year tenor.

Credit default spreads are used as a proxies for offshore player sentiment and sovereign risk.

The Kwacha Arbitrageur