The Central Bank in Africa’s second largest copper producer, the Bank of Zambia (BOZ), sold K170 million worth of treasury bonds in a deeply under-subscribed debt sale on Friday 14 June. With aggregate market liquidity of K782 million on auction date, analysts had forecast a 50% subscription haircut – best case scenario.
This was the weakest outcome in over a decade representing a 10.33% subscription. With K1.65 billion on offer, appetite was anemic at K483 million of which only K170 million was absorbed with appetite for 2 and 3 year tenors.
The Kwacha bond curve was unchanged as the central bank rejected cheeky bids in its quest to manage interest yields with the medium end of the term structure of interest rates priced between 29.5% – 30.5%.
Secondary market fixed income yields continue to narrow but remain elevated with offshore players purchasing 2 year paper for as high as 31.5% (300 basis points lower than a month ago).
Friday’s subscription hair cut widens the funding gap for fiscal activities. This week on the 20 June the Bank of Zambia has on offer K950 million worth of treasury bills.
