With markets running K882million long into Thursday 16 January, the central bank in Africa’s copper producer Zambia sold K531.7million ($36.6million) worth of treasury bill assets in the second government debt sale of 2020. With an improved appetite of K665.4million compared the dismal K253million a fortnight ago, the central bank absorbed K531.7million in cash terms.
Unattractive after tax rates compared to NDFs. Yields were unchanged across the spectrum save the one year that ebbed 50 basis points to 28%. Kwacha after tax yields nonetheless remain unattractive compared to Non Deliverable Forwards (NDFs) weighing offshore interest.
Lucrative MTM margins vs secondary market pricing. However the key driver of appetite in the local market is the secondary market pricing in the one year fetching 29-30% which allows traders a Mark to Market (MTM) opportunity to mint decent trading margin.
Analysts forecast that given the macroeconomic landscape treasury bill performance will outperform bonds as was last year. This will be a reflection of risk appetite for shorter dated higher yielding assets as sovereign risk remains a key concern in Zambia.
The Kwacha Arbitrageur