Central Bank in Africa’s copper producer, Zambia has recorded the second anemic outcome this week after filling up only 21% of its K1.65 billion offer in government bonds. The Bank of Zambia only succeeded in attracting K341 million worth of liquidity to buy the fixed income securities on offer.
Ninety eight percent of the debt sale was skewed in the 2,3 and 5 year tenors whose yields edged higher by 550, 525 and 500 basis points to 29.5%, 29.75% and 30.5%. The under subscription is the tenth so far this year of eleven debt sales (9 – treasury bill and 2 bond offerings).
The widening of credit spreads in today’s sale is a long awaited correction in the money markets to levels reflective of the sovereign risk of Kwacha paper which for a long time has been overpriced, BT Chief Market Analyst said. Kwacha non deliverable forward rates have been at similar premiums above the treasury bill curve close in quantum to the moves observed in the bond auction. What the market observed today is not a shocker but a reflection of the credit risk profile of the counterparty, he said in a note.
The currency is risk off weighed by souring sentiment on falling reserves and rising debt service putting pressure on the fiscals. The Kwacha in intraday trade slid to 12.88 levels before reversing some of the steep losses to close Friday 26 April at 12.78.
