By BUUMBA CHIMBULU
HIKING securities bidding thresholds by the Bank of Zambia (BoZ) could be an attempt to curate the overcrowding effect of commercial banks in the money markets.
The minimum amount for competitive bids has been scaled to K500, 000 (face value) from K30, 000 per bigger per maturity tenor while the maximum bid amount for the non-competitive window has been adjusted to K499, 000 (face value) from K29, 000 per bidder per maturity tenor.
This could force commercial banks to lend to corporate credit and retail markets, according to the Economics Association of Zambia (EAZ) national secretary, Mr Mutisunge Zulu.
“On the face of it, the Bank of Zambia could be attempting to curate the overcrowding effect of commercial banks in the money markets but ebbing yields below inflation thereby forcing them to lend to corporate credit and retail markets, investments by retail units will be adversely impacted,” Mr Zulu said.
According to the Mr Zulu, hiking the threshold would allow retail players increase their investment appetite should they have greater pools of funds.
It indicated that this because of the current demand for government paper by offshores which had fuelled a currency rally.
“Zambia’s securities have seen a surge of demand from offshore players given the state of the global economy marred by elevated inflation and ultra thin treasury yields causing a gold rush in emerging and frontier market assets.
“This coupled with increased sentiment as political risks subside in the wake of new leadership, the fixed income markets have seen record appetite circa K12.5 billion in the August 27 sale, adding to more bids seen in private placements that have been on the rise as funding quagmires widen,” Mr Zulu stated.
The BoZ however indicated that it decided to revise the thresholds to realign to economic changes and time decay since they were instituted.
Other factors taken into account to adjust included inflation changes over the last 20 years and the central banks drive to enhance financial inclusion.
By BUUMBA CHIMBULU