The central bank in Africa’s copper producer, Zambia, on 20 Dec sold K1.14billion worth of treasury bills in a 120% oversubscribed auction. On offer was K950million, and given market liquidity of K1.44billion (as measured by aggregate interbank current account balance), K1.35billion (nominal terms) was absorbed representing a 1.36 bid cover ratio. This auction is the 5th fully subscribed auction of all 26 offering in 2018.
Read also: Liquidity markets flush enough to absorb Thursdays kwacha treasury bill auction
Last Fridays 14 Dec bond sale was poorly subscribed as market players reserved liquidity for the last treasury bill auction of the year. Kwacha short term assets (treasury bills) are attractively priced at yields of 280 basis points above the most lucrative priced government bond, 5yr. paper paying 20.3%. The BOZ sold K315million in long dated assets concentrated in the 3yr., 5yr. and 10yr. tenors accounting for 94% of the bond auction.
Sixty Six (66%) of today’s allocation was in 1yr. treasury bills whose appetite in bids totaled K1billion yet 75% was absorbed while the 273day asset recorded K312.5million in demand with K227million allocated. The 9m and 1yr tenors remain the most attractive points on the kwacha term structure of interest yielding 21% and 23% respectively.
Kwacha demand curve fairly unchanged
The kwacha demand curve however was fairly unchanged with 6m yields climbing 50bps to 15% as the 1 yr. marginally eased 20bps to 23%. With last Fridays bond demand curve fully inelastic, the kwacha yield curve remains descending with a 280bps spread between the long and short end. This makes treasury bills more attractive than longer dated fixed income paper.
The next T-bill auction will be on the 03 Jan next year.
