LUSAKA (BT) – The Zambia Statistics Agency – ZSA is expected to announce June inflation numbers on Thursday 24 June at which analysts and economists forecast a 20 points uptick to 16.8%. According to Zambia National Commercial Bank Head of Research Dr. Patrick Chileshe, inflation should climb to 16.8% for June supported by an ease in food prices, this was during TreasuryWatch MoneyFM show on 23 June.
In a morning BT- podcast note on MoneyFM’s behind the markets show, inflation is expected to headline at 17% supported by a slower non-food prices due to a milder volatility offsetting the lower food price benefits as maize prices plummet on the back of a bumper harvest this year.
ANAEMIC APPETITE FOR BONDS EVEN COVID BONDS The central bank in Africa’s copper producer will target to sell K1.1bln worth of bonds in 2,7 and 15year fresh bonds while the 3,5 and 10year being re-issuances. Markets remain cash flush but the fixed income offering will not be as attractive given that risk appetite skew remains for shorter dated higher yielding assets such as treasury bills. Bond subscription for 2020 has remained suppressed at 35% as Zambia’s fiscal risks remain elevated following sovereign downgrades and amplified risks posed by disease pandemic. Zambia has taken significant steps towards getting an International Monetary Fund – IMF bailout package whose request will only actualize after successful debt reorganization. Government securities are already pricing in sovereign risks and as such secondary market yields remain at premiums above the primaries. Market players will watch the Kwacha demand curve on Friday as the last treasury bill sale reflected falling yields in the longer end as the 1year climbed down 75 basis points to 28.0001%.
Appetite for COVID bonds? Zambian cabinet approved an K8bln stimulus package to be achieved through issuance of COVID bonds. Given the weak outcome of the government bonds, it is unlikely that there will be significant appetite for these pandemic bonds. Players however are playing an array of scenario’s ranging from likely quantitative easing to channeling pension fund moneys to offset the liquidity burden for outstanding arrears to retirees, suppliers and contractors.
The Kwacha Arbitrageur