Bank of Zambia Sold $USD127million in Last Bond Auction of the Year 2017
BANK of ZAMBIA sold the Kwacha equivalent of USD127million in the last bond auction of the year held on 15 December 2017. On offer was ZMW1billion while bids totalled ZMW2.136billion translating to a bid cover ratio of 1.699.
Being the most attractively priced bonds paying between 17.95% – 20%, the 3yr, 5yr and 10yr tenors recorded the highest appetite accounting for 82.6% of the bond sale. The auction was 25.7% oversubscribed signalling increased appetite for government borrowing to fund its pressing needs.
Yields in the 3yr and 10yr edged lower marginally by 55bps and 100bps to 17.95% and 20% respectively.
“Inferring from a delayed IMF program the government is pressured to fund numerous local programs key of which include dismantling of arrears which has to some degree contributed to commercial bank impairment numbers as most service providers have not been paid and in turn these entities are struggling to service financial obligations. Widening the auction size should assist raise the funding government needs to absorb the fiscal pressure. This will be in addition to other sources such as taxation and dividends from profitable parastatals. - Market Strategist - ZBT