Risk skew in Africa’s second largest copper producer Zambia is skewing towards longer dated tenors for Kwacha government securities as geopolitics autopsies. Thursday April 21 treasury bill sale saw the first undersubscription of the year 2022 with the central bank raising K580.8 million of the K2 billion of assets on offer. Appetite was fairly weak at K632.3 million with significant interest in the 6 months tenor. The yield curve continues to sag with the 6 and 9 months ebbing 19.75 and 70 basis points to 10.8024% and 11.0001% respectively as the 1 year rose 47 bps to 13.7500%.
The Kwacha money markets are seeing a bigger shift in risk skew to the longer end as new money flows and capital flight pressures widens. The chaotic state of the global environment has increased appetite for dollar denominated assets as offshore players are channeling their liquidity to the west whose interest rates are more attractive in the wake of the genesis of a rate hike cycle by the US Federal Reserve Bank to curb excessive inflation.
According to Nikiwa Capital Chief Analyst Munyumba Mutwale, Kwacha interest markets are seeing more interest in bonds that treasury bills on account of higher yields on the longer end and a more positive outlook on sovereign risks. Some classes of investors remain bullish on Zambia and have continued to pack liquidity in bonds that are fairly attractive. With the more recent development in the restructure odds after China agreed to join Zambia’s creditor club using a common framework, will give risk appetite another boost, he said.
On Friday April 29 the Bank of Zambia will seek to raise K2.6 billion worth of fixed income assets in the fourth sale of the year 2022. This will be in 3,5 and 10 year re-issuances while the 2, 7 and 15 year will be fresh issuances.
The Kwacha Arbitrageur