The Government raised K873 million at the third quarter (Q3)2015 bond auction. K1 billion worth of bonds were up for sale with maturities ranging from 2 to 15 years:
The auction was marginally oversubscribed by 2.1% compared to 4.5% at the second quarter (Q2) auction held in May. However, on a tenor-by-tenor basis, the Q3 auction had an average subscription rate of 109% compared to 62% at the Q2 auction (where 88% of bids were chasing the 5 year instrument) – indicating stronger overall demand from investors in Q3.
The 2, 3 and 5 year yields spiked by 750, 127 and 100 basis points to 23%, 23.5% and 25%, respectively. The 7 and 10 year yields fell by 100 basis points each while the 15 year yields remained unchanged:
All the bonds yields are now trading above 20%. Government borrowing costs have remained high despite an effort to cut down on domestic borrowing. This has in turn been pushing up private sector lending rates. According to central bank data, commercial bank average lending rates stood at 20.30% as of August 21.
The Kwacha broke another all-time record when it declined to K9.49 per US dollar earlier today – a decline of 46% year-to-date. Volatility (and decline) in global copper prices caused by a negative sentiment on Chinese growth and low domestic US dollar supplies continue to have an adverse effect on the currency.
Trying to decipher this puzzle that is Zambia by using a variety of publicly available data (structured and unstructured) in conjunction with my own skill/experience. * * *