As global appetite for risky assets sharply waned, more and more players are seeking refuge in safe haven bets such as US treasuries and bullion in the wake of the coronavirus pandemic. One such assets are Kwacha bonds that recorded a dismal performance in the second debt sale of the year.
The Bank of Zambia sold K257.5million in 3,5 and 10 year bonds of the K1.1billion on offer. Appetite was fairly anemic at slight over half a yard of which K426.9million was absorbed in nominal terms.
Yields were fairly flat with the sweetest point on the fixed income curve, the 5 year tenor, priced at 33% while the 3 and 10yr stood pat at 29.75% and 23.5% respectively.
This auction comes a day after the treasury bill sale sold K927million in a cash flush market in excess of K2.05billion that saw the curve unchanged.
Disinvestment risk and higher dollar demand in a liquid thin foreign exchange market sent a the currency to all time lows of 15.45 for a unit of green back as demand for risky assets waned in the wake of corona virus spreading to parts of Africa.
Earlier in the week, consumer price index ebbed 140 basis points higher to 13.9% eroding real returns on government securities. Interest rate risk remains elevated in the copper producer.
The Kwacha Arbitrageur
