Credit Default Spreads – CDS on Zambia’s dollar bonds widened significantly as default risks loom. On average credit spreads on Zambia’s bonds maturing 2022 are 5,601.23 basis points while the 2024s are 3,826.87bps and bonds maturing 2027 are spread at 2,992.23bps above benchmark similar tenor US denominated assets.
Zambia’s dollar bonds are the worst performers of all emerging and frontier market date with the lowest price of 41.85/44.63 on its 2022’s, 42.23/44.92 on its 2024s and 40.44/43.62 on its 2027s in Bid/Ask.
The SD S&P rating will have steep credit impairment implications for the banking sector in line with IFRS9 prescriptions.
Read also: S&P lowers Zambia’s rating to Selective Default
Credit rating agency Standards and Poor’s was the first rating body to send the copper producer into selective default on 21 October from CCC- while Moodys and Fitch are expected to align in due course. The red metal producer is deep in the labyrinth of a roulette quagmire of creditor negotiations with both the Chinese and eurobond holders which has put Zambia is a tight spot. Its MinFin earlier last week echoed lack of fiscal space to meet its obligations barely a few days before bondholders voting aligned to a solicitation request for coupon payment freeze of a semi annual cycle to 14 April.
Zambia got a life line after quorum could nonetheless not be met. Voting was extend to November 13 coinciding with expiry of a grace period for payment of a coupon on its 2024 paper that fell due on 14 October.
The Kwacha Arbitrageur.