LUSAKA (The Business Telegraph) – Dollar bonds for Africa’s second largest copper producer rallied close to 91 basis points on average in the 2022 and 2024 over the last 5 days. Zambia’s dollar bonds got a boost from deliberations with the Washington based lender IMF who were in virtual talks with the copper producers Ministry of Finance from 22 June to 10 July.
IMF discussions a boost for dollar bonds. Zambia seeks a Rapid Credit Facility – RCF following heightened fiscal pressure in disease pandemic era that has seen reallocation of public resources to health care as the red metal producer fights exponentially rising cases north of 3,326 (20 July). The IMF was mandated to commence bail out package talks with Zambia for an economic program on 22 June. However we remain of the view that an RCF will only be possible in the first quarter of 2021 latest or last quarter of 2020 as the Southern African nation demonstrates its commitment towards restoring fiscal fitness. The rally in yields is a positive for Zambia as it takes keen strides to restructure its debt and could soon be on a program which will open the economy to investment flows. The central bank has recorded improved subscriptions in fixed income securities following IMF discussions.
Revised budget delays capping rally extension. However, the rally has been capped by a delay in a revised 2020 budget. Bond holders and money managers now grapple with angst as to when the revised budget will be announced.
The 2027s were a tad lower at 21.21% 101bps from levels seen 5 days earlier.
The Kwacha Arbitrageur