BOZ ob­serves in­creased ap­petite for 1year Kwacha Trea­sury Bills

Zambian Business Times - - BUSINESS REVIEW -

“Short dated trea­sury bills are less risky be­cause the du­ra­tion is lower hence they ma­ture faster than hav­ing to lock in bonds in an in­ter­est rate un­cer­tain en­vi­ron­ment. How­ever, we must also be cog­nizant of the fact that the 1yr trea­sury bill is a bench­mark for fixed de­posit rates for banks that are strug­gling with liq­uid­ity, hence a spread above the 16.5% will price a fixed de­posit for the same tenor to at­tract de­pos­i­tors. Chief Mar­ket An­a­lyst – Zam­bia Busi­ness Times

BANK OF ZAM­BIA has con­tin­ued ob­serve in­creased ap­petite for 1-year Kwacha Trea­sury bills. In the auc­tion held on Thurs­day last week - 18 Jan­uary, the reg­u­la­tor reg­is­tered ZMW963mil­lion de­mand for 1-year gov­ern­ment debt out of the ZMW1­bil­lion in bids ac­count­ing for 93% of the T-bill sale. The rea­son for this rise in ap­petite is on the back of the yield of 16.5% the 1-year tenor is pay­ing. The one year has been at­trac­tively priced for over a quar­ter which has at­tracted most play­ers that are cash flush to lock in a guar­an­teed 16.5% yield. The Bank of Zam­bia sold ZMW1­bil­lion in an of­fer­ing that was 8.5% over­sub­scribed. Fore­casts on rates in the sub­se­quent months, in­ferred from the 65% in­crease in bond auc­tion size, is that bond yields will trend bear­ishly (rise) as gov­ern­ment over­crowds the do­mes­tic money mar­kets to fund its bor­row­ing needs to meet a wide spec­trum of obli­ga­tions to in­clude dis­man­tling of ar­rears. This is looked at in the wake of a de­layed In­ter­na­tional Mone­tary Fund – IMF $USD1.3bil­lion pro­gram.

Against all odds the 9m trea­sury bill yield edged 110bps lower to 11.89% while all other tenors were static. The one-year trea­sury bill be­ing the long­est tenor on the short end of the Kwacha trea­sury bill curve is used a proxy for what to ex­pect in the bond auc­tions.

The next auc­tion will be held un­der a fort­night on 01 Fe­bru­ary 2018.

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