With K1.1billion worth of liquidity into Thursday 20 May treasury bill sale and maturities in the pipeline, the central bank in Africa’s copper producer sold a record K2.64billion of government securities. Appetite for securities pulsed K2.6billion of which K2.17billion was absorbed with K1.23billion housed in the 1-year paying 29.0%.
This outcome is the third oversubscription in a row and the highest uptake so far in 2020. Yields remained pat. This debt sale was a day after the central bank cut rates 225 basis points to a record 9.25% in a growth suppressed environment. With the Bank of Zambia targeting to lower rates through a stimulus package that seeks to cushion the impact of COVID19 on the economic players. The surge in subscription reflects an increase in borrowing appetite given the need for funding for public health in a disease pandemic era. BOZ has been active in open market operations as it monitors liquidity conditions in its quest to ensure financial stability in periods of economic turbulence.
The elevated inflation environment continues to erode premiums on risk in government securities making it the assets unattractive for investment. Inflation last printed at 15.7% and could climb as high as 16.5% for May in next weeks announcement.
The Bank of Zambia is next Friday 29 May offering K1billion worth of new bonds across the fixed income tenor as per prospectus pitched on its website.
The Kwacha Arbitrageur