The central bank in Africa’s red metal hotspot sold K1,793million ($84.2million) worth of treasury bills in the debut sale of 2021 held on Thursday January 14. Given an appetite in excess of two yards in Kwacha terms, the Bank of Zambia (BOZ) was able to absorb 81.7% of demand given a market liquidity position of K1.3billion with maturities in the pipe line. BOZ had K1.3billion assets on offer.
The highest market appetite was observed in the one year tenor of K1.83billion of which K1.45billion was locked in at 25.75%, the most lucrative point on the yield curve. Other tenors saw infinitesimal demand save the 6months tenor absorbed K176.3million.
With a rising inflation trajectory at 19.2% for December 2020 as reported by the Zambia Statistics Agency (ZSA) the term structure of interest rates remains underwater (below inflation) save the one year priced at 655 basis points (bps) above consumer price index. Negative premiums (yields less inflation) makes assets unattractive.
With elevated sovereign risks, it is forecast that treasury bills will outperform bonds this year given an array of factors spelling uncertainty.
The Kwacha Arbitrageur
