A day after hiking its benchmark rate by 50 basis points to 10.25%, Zambia’s central bank successfully sold K1,052 million (at cost) worth off treasury bills. This is the second fully subscribed of the 13 auctions held so far in 2019.
Of the K1,558 million in bids recorded, 67.5% were absorbed with 58.74% (K618.40 million) of appetite locked in 1 – year paper earning 26.2501% (unchanged from previous session). Other attractively priced tenors were the 9 – month yielding 25.201% that housed 20.43% (K215.61 million) of appetite recorded today.
Central Bank Governor Dr. Denny Kalyalya in his MPC note on the 22 May, noted the decline in subscription rates for government securities to 29% from 33% and cited the rise in weighted average yields for government securities to 22.6% from 21.4% in the previous quarter.
Given the current level of inflation of 7.7%, premiums for sovereign risk remain wide making real yields attractive. However with Kalyalya’s forecast of elevated inflation over the next two years, premiums may narrow and this could signal further rate hikes for Zambia.
Currency risks have subsided in the week with the Kwacha reversing most of the losses incurred in last weeks streak that saw the copper currency trade at 42 month lows. With the BOZ in the market on Tuesday, pressure on the local currency eased evidenced by the 7.7% rally to 13.1 for a unit of dollar in Lusaka the capital at 3.30 pm on 23 May.
