With market liquidity of K1.48 billion as measured by inter-bank aggregate current account balance, Zambia’s central bank (BOZ) will offer K950 million in treasury bills on Thursday 19 Dec. across the curve spectrum. It expected that this auction will be a fully subscribed sale given the current attractive short term government debt pricing.
A 280 bps spread above last week’s 5 yr. bond offering is the current price of the 1 yr. paper which made players reserve liquidity for this last offering of 2018. Last Friday recorded the poorest outcome for the year with anemic appetite account for only 15% of the K1.65 billion offer of which demand for 3 yr and 5 yr paper accounted for 84% of the sale. BOZ raised K315 million in an 85% under-subscribed offering.
Yields are not expected to edge any higher significantly but we cannot rule out a few chancers that pay push in cheeky bids aligning to market swap curve pricing that still reflects 350-450 bps credit spreads above current treasury bills curve hoping to maximize returns in the short term.
Thursdays auction is forecast to be a redemption of last Fridays 14 Dec. bond offering.
Currency weakness even makes its more attractive for offshore players selling dollars for kwacha to fund the 1 yr investments at above 23.2%. The kwacha has grappled within +/- (0.5%) of K12/USD.