Treasury Bills auction mints over K2.2bn

OVER K2.2 billion was realised from Treasury Bills auction held on Thursday as players in the market continue to opt for shorter tenure assets.

The 05/2021 Treasury Bills auction held on Thursday was oversubscribed with total bids received amounting to over K2.2 billion (at face value).

This was against K1.3 billion on offer by the Bank of Zambia (BoZ), says Absa Bank Zambia Market Report.

“With liquidity levels still high in the market, players continue to opt for shorter tenure assets such as Treasury Bills. Yields remained flat across all tenors,” Absa Bank said.

With the central bank selling K1.65 billion worth of short dated securities in Thursday, March 11 debt sale, a yard of that was housed in the one-year tenure.

With a market liquidity of K4.0 billion, bids totalled K2.2 billion of the K1.3 billion on offer.

Players appetite observed for one year assets was K1.6 billion of the K650 million on offer.

The Kwacha Arbitrageur said despite the rest of the Treasury bill curve underwater (yielding below inflation) the BoZ had observed additional interest in the shorter tenors, especially the 3months.

“Thursday debt sale saw K421.5 million of liquidity housed in the 91-day (three month) tenor yielding 14.0 percent.

“On the face of it, all tenors underwater maybe unattractive from an investment perspective, cash strapped players have appetite for three month treasury bills because of duration mismatches,” the magazine said.

It explained that despite aggregate interbank balances in the long, as the central bank is active in open market operations (OMO), liquidity skew remained uneven and concentrated with the bigger banks leaving smaller banks disadvantaged.

These banks, the magazine said, could not afford to lock their liquidity in tenors exceeding three months as they manage duration versus funding risks.