- Elevated credit risk profile is reflecting in market players affinity for higher yielding shorted dated Kwacha assets
Barely a week after the dismal performance of the third treasury bond auction of 2019, the Bank of Zambia sold K852 million worth of treasury bills on Thursday 20 June in an auction that was 90% filled. Market appetite was slightly over a yard (K1.04 billion) in local currency of which 85% was absorbed at cost. This outcome redeems the weak anemic outcome of Friday 14 June fixed income sale that saw the central bank in the copper producer take a deep haircut to raise only K170 million of the K1.65 billion on offer, the weakest outcome in over a decade.
Seventy eight percent (78%) of Thursdays allocation was housed in the 1- year tenor yielding 26.5% while the other tenors took a spread of the remaining K179 million. The auction also saw some demand for 3 month paper yielding 16.5%.
Market yields were unchanged as the BOZ sought to curtail any interest rate rises. Thursday 20 June debt sale was the 13th T-bill auction and the 16th total government security sale of the year totaling the funding gap to K6.7 billion (equivalent of $519 million).
“There’s more and more affinity towards shorter dated higher yielding assets in this elevated credit risk environment. Players are more poised to lock up liquidity in the 1 year at 26.5% than anywhere else on the Kwacha yield curve,” a Market analyst at one of the commercial banks in Lusaka said.
The copper currency continues to hold firm at 2.5 month highs supported by payroll funding and tax conversions.
