In the Zambia’s central bank 25th treasury bill sale, the market observed increased interest in demand for government securities in the 9month and 1year tenors. With market appetite of just under 2 Kwacha yards, the Bank of Zambia were able to sell K1.6billion worth of bills of the K1.3billion of assets on offer, of which a billion Kwacha of liquidity was housed in the tenors between 6m-1yr.
Yields remained fairly tad with the 6m-1yr paying 19.65% and 24.55% respectively. The other less sought for tenors namely the 3m-6m were still underwater at 14.0% and 16.0% respectively benchmarked against an inflation number of 17.4%.
The market continues to observed a risk skew towards shorter dated higher yielding assets versus longer dated fixed income on account of duration concerns post sovereign default. Rating agency Fitch earlier in the week default rated Zambia’s credit assessment aligning to Standard and Poor’s November selective default rating.
The Kwacha demand curve has seen tremendous downward adjustment on the shorter end given liquidity flush conditions while the bond yields remain elevated keeping term funding costs high.
The Kwacha Arbitrageur