Cash markets in Africa’s second largest copper producer Zambia, commence 2019 with a flush position enough to absorb the K950million, Thursday 03 Jan treasury sale. This will be the first debt sale for the year 2019.
Interbank aggregate current account balance as at 02 Jan (14:15pm) was K1.41 billion. The Bank of Zambia will sell assets across the short end of the kwacha curve (3m – 1yr). Expectations are that this debt sale will be a de javus of the 20 Dec.18, a fully subscribed offering. Given the current kwacha demand curve, we forecast higher appetite for 1-year assets than any other tenor.
The 1yr treasury bills were last priced at 23%.
Read also: Liquidity markets flush enough to absorb Thursdays kwacha treasury bill auction
Liquidity and credit risk spreads between the swap curve and primary market cash market yield remain between 250 -270bps as secondary markets price in sovereign risk concerns the copper producer faces.
Yields are expected to remain unchanged with minor likelihood of uptick in the 9m to 1yr by 50bps. These blips could stem from players that always push their luck.
With Dec.18 inflation at 7.9%, kwacha assets are fairly attractively priced.