Better subscription, cheeky bids,1-year money reprices 24bps higher

One year treasury bills were repriced 24 basis points higher to 28.24% in Thursday 30 January government security auction. With K1.3billion of market liquidity into the sale, the central bank in Africa’s copper producer Zambia, was able to raise K719million in cash terms a better outcome that the first two sales of the year. Appetite was headlined in excess of K1.19billion of the K950million on offer but only absorbed about 65% of the assets on the back of cheeky bids by players.

The interest rate risk environment remains bearish with steady repricing observer so far in the year in the 1year which has so far ebbed 74bps higher while bond yields have so far risen 145bps in the 2year while the 15 year last widened 100bps. The Zambia Statistics Agency announced an 80bps hike in January inflation to 12.5% signaling a narrowing in compensation premium for players taking risk in government security. Energy price risks remain the key driver of consumer price index which could potentially shape monetary policy stance in February’s rate decision meeting for Zambia.

Significant demand for paper in the one year totaling K474.3million was observed of the K719million allocated. The funding deficit nonetheless continues to widen with Thursday’s auction being the fourth undersubscription for the year 2020.

The Kwacha Arbitrageur