The central bank in Africa’s second largest copper hotspot Zambia will on August 27, seek to raise K1.4 billion (circa $73.7 million) in government bonds. This will be a special post election bump bond offering in a week that the Southern African nation has seen a change in leadership after landslide victory in favor of President elect Hakainde Hichilema leader of the United Party for National Development – UPND who defeated the Patriotic Fronts – PF’s Edgar Lungu.
The leadership change has seen risk appetite claw back into the Zambia markets with money managers in Wall Street recommending Kwacha assets to offshore players seeking yield on the back of subsiding political risks. For liquid markets sentiment proxies trended positively with Zambia’s eurobond prices on a winning streak appreciating 8% across the board for its 2022, 2024 and 2027.
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The state of the global economy given high inflation but ultra thin yields on treasuries has supported the influx of offshore flows into emerging and frontier markets as investors hunt for real positive yields which Zambia has not been exempt. Real yield remain positive as investors are able to lock in between 26%-30% in returns on the secondary market.
With the boost in confidence, it is forecast that Friday’s auction will attract record participation as international players seek to book the post election bump bond trade. Additionally inflows from this ‘govie’ gold rush will likely provide support to the currency whose outlook has continued to improve as sentiment seeps back into the markets.
The Kwacha Arbitrageur