The central bank in Africa’s copper producer, Zambia, sold K789 million (in cash terms) worth of short dated government paper in Thursdays 03 Jan auction which was 83% subscribed. This was adequate to cover a current maturity profile of circa. K770 million.
Analysts forecast was that, with K1,419 million worth of market liquidity, the BOZ would absorb the entire asset offering to fully subscribe the debt sale. However despite 17% under-subscription, the sale nonetheless generated adequate cover for the maturing obligation ladder by 1.02x.
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The debt sale attracted K994 million worth of bids of which circa. K205 million of cheeky bids were rejected. As expected the treasury sale was skewed 62% in the 1-year that was priced 13bps higher than a fortnight ago at 13.1298% while 20% was concentrated in the 9 month tenor yielding 21% (unchanged from the 20 Dec. outcome). All other tenors were unchanged.
Spreads between primary treasury bill yields and swap rates have remained 250 bps wide on average which could suggest kwacha assets are fairly overpriced by the same margin.
With inflation of 7.9% the premiums for taking sovereign risk still make overpriced kwacha assets attractive.