DOLLAR BONDS: Yields on African Eurobonds widened 8 basis points with Zambia’s bonds 22 bps higher. Dollar bond movement was elastic to the US Fed dovish stance on interest rates ahead of a G20 summit which is fueling demand for riskier assets.
KWACHA BONDS: In secondary market trading 2-5 year bonds are still priced between 28%-29% compared to levels of 32%-35% a few months ago. Longer dated tenors are paying circa 30% reflecting elevated credit risks given the fiscal posture of the sovereign.
LIQUIDITY: The central bank injected K1.17 billion in its Open Market Operations – OMO cushioning the gap created by cash that was absorbed by the revenue authority in taxes leaving the market net short circa K500 million. This cash position supported the Kwacha with corporates seen converting dollars for Kwacha funding for monthend payrolls.
CURRENCY MARKET: The Kwacha closed yesterday’s session at K12.975 compared to K12.915 In the previous session supported by month-end payroll conversions.
“We had solid demand versus supply yesterday, demand was only slightly higher than the supply that the market was long dollars alternatively some of the tight funding played a part with regards to the trading yesterday,” an unnamed commercial bank trader told the Business Telegraph.
INTERNATIONAL: Brent crude shaved 16 cents to $66.30/bbl as US crude futures (WTI) was 23 cents lower at $59.16/bbl as markets priced in the increased inventories in the US markets. However, OPEC+ will meet in the first week of July to discuss oil supply cuts that are giving support to crude prices.
Golds shine was taken away yesterday as the dollar index (DXY) against a basket of 6 major currencies rose 0.19% to 96.78. Gold is nonetheless trading for $1,406.29/ounce.
Asian and US stocks futures continue trading cautiously ahead of the G20 summit this weekend as markets seek thaw around US China trade relationship which has battered stocks pushing investors towards US treasuries and gold as safe haven assets.
By Kondwani Phiri (BT Analyst)
