Zam­bia Sells $72.5mil­lion worth of Bonds as Yields Soar 300bps (3%) Higher

Zambian Business Times - - FRONT PAGE -

AFRICAs sec­ond largest cop­per hostspot, on Fri­day 27 Nov raised $72.5mil­lion (Kwacha equiv­a­lent) worth of bonds across the en­tire curve spec­trum. With a ZMW1mil­lion on of­fer, bids to­talled ZMW725mil­lion of which the BOZ ab­sorbed the en­tire ap­petite trans­lat­ing to a bid cover of 1.

The auc­tion was in a nut­shell 27.5% un­der­sub­scribed. Sixty Eight per­cent (68%) of the ap­petite was con­cen­trated in the 3yr and 5yr tenor amount­ing to ZMW494.73mil­lion. Bond yields rose for the 7yr and 10yr by 350bps and 300bps to 19.5% and 21%. (1bp = 0.01. 350bps -300bps trans­late to 3.5% and 3%). This makes the long end of the curve very at­trac­tive for those search­ing for yield on en­dow­ment or hedge books.

The in­ter­est rate mar­ket seems to be pric­ing in the weari­ness of an IMF de­lay and as such govern­ment will place heav­ily reliance on do­mes­tic bond mar­kets to raise fund­ing for their projects. The trea­sury bill auc­tion on Thurs­day 26 Nov was equally un­der­sub­scribed as play­ers re­served their cash for the bond auc­tion in an­tic­i­pa­tion of higher yields.

Clearly mar­kets are sig­nalling fund­ing strains for the govern­ment which makes an­a­lysts jit­tery about what to ex­pect in the Novem­ber rate de­ci­sion meet­ing. All things con­stant in­fla­tion is fairly low at 6.4% mak­ing Zam­bian bond yields very at­trac­tive to off­shore play­ers.

Zam­bia’s sec­ond largest de­nom­i­na­tion used as le­gal ten­der

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