With K1.5billion of market liquidity as measured by interbank aggregate current account balances, there was adequate purchasing power in Thursday, 07 May treasury bill sale. With K950million of assets on offer the central bank in Africa’s copper producer Zambia, sold 40% above its offer benchmark raising K1.33billion of a total appetite of K1.8billion in bids observed.
Sanguine government borrowing appetite signs. The central banks reserves the right to borrow in excess of 20% above the assets on offer. A 40% oversubscription signals the regulator breaching its own prescription signaling sanguine funding needs for the state.
T-bills still more attractive. As expected 78% of bids were concentrated in the 1-year tenor whose yields ebbed 25bps lower to 29% of which K968million was allocated in cash terms. Risk skew themes remains one of higher appetite for higher yielding shorter dated assets than bonds given the deteriorating fiscal posture amplified by COVID related risks.
The Bank of Zambia has been active in Open Market Operations (OMO) providing liquidity as part of the prescribed COVID19 stimulus measures to allow for financial stability.
Yields are forecast to climb down if commercial banks do take up the Medium Term Emergency Facility given the differential with the Kwacha demand curve. However the largest inertia will be from government borrowing appetite currently shaping the yield curve.
The Kwacha Arbitrageur
