Central bank in Africa’s second largest copper hotspot Zambia on 20 March sold $21million (Kwacha equivalent) of 2,7 and 15yr bonds in a poorly subscribed auction. On offer was a yard in assets with appetite totaling K539.4million ($31million equivalent) which the Bank is Zambia absorbed K369.3million. Market liquidity going into the auction was only K100million. Kwacha assets alongside other emerging assets are generally unattractive to offshores who seek safety in dollar cash in the wake of coronavirus pandemic.
Yields across the Kwacha fixed income curve were unchanged save the 15-year point that widened 100 basis points to 31%. The debt sale revealed a risk appetite skew of appetite for shorter as opposed to longer dated paper. Ninety eight percent of the Thursday proceeds were housed in the 2year tenor.
Market fundamentals continue to be impacted by a global emerging and frontier market asset rout that has rattled the copper producers currency as demand for riskier assets wanes sharply. Copper on the London Metal Exchange tanked to lows of $4,433 per metric tone before falling to $4,850 a metric ton. The Kwacha closed Friday’s trading at a new all time low of 17.2 for a unit of dollar. Exposed to commodities, the red metal producers dollar bonds remain the worst performers at credit spreads of between 2,643-4,615bps reflecting feeble global fundamentals.
The Kwacha Arbitrageur
