Bank of Zam­bia Sold $USD127mil­lion in Last Bond Auc­tion of the Year 2017

Zambian Business Times - - FINANCIAL MARKETS -

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

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