By BUUMBA CHIMBULU
ZAMBIA’S 11th bond auction was oversubscribed by 271.8 percent with investors placing bids worth K4. 07 billion.
After experiencing the first under subscription in three months, the 11th bond auction was oversubscribed in a show of investor confidence ahead of Article IV mission announcement by the International Monetary Fund (IMF) mission team.
Against a borrowing need of K1.50 billion, investors placed bids worth K4.07 billion at cost during auction number 11/ 2021.
This is compared to the previous K1.32 billion, an increase of 206.6 percent, according to Zanaco Bank Plc monthly newsletter prepared by the research team.
“As a consequence of improved investor participation, auction number 11/ 2021 was oversubscribed with a subscription rate of 271.8 percent compared to an under subscription of 88.6 percent achieved in October,” the report stated.
The bank attributed the rebound in demand for securities to a number of perspectives that could have caused.
According to the bank, first, and for offshore investors, the projected improvement in the sovereign risk as Zambia gets closer to an IMF deal was forcing many to lock in returns.
“Moreover, we are seeing more risk averse investors investing in Zambian local currency notes in search of stable flow of income.
“Second, with an exception of the 2-year bond, all tenors are providing a positive real return as their nominal yields rates are all above the inflation rate of 19.3 percent for November,” the report indicated.
In line with conventional wisdom, yields on government bonds generally declined in the 11th auction with an exception of 15-year tenor.
“Meanwhile, the yield on the 15-year bond rose 20 basis points to 26 percent in the last auction. Clearly, the yield curve steepened in the last auction resulting in capital gains for investor with bulleted portfolios,” according to Zanaco.
Investors bid over K4.07bn in bond auction
