Liquidity on increase

THE drop in treasury bills yield rates last week has resulted in increased liquidity to over K1.5 billion on Monday, keeping central bank off the open market operations (OMOs).

Last week, treasury bills yield rates dropped on all tenures, 91-days from 11.75 percent to 9.25 percent, 182-days from 11.50 to 9.50 while the 273-days and 354-days from 10 percent to 9.50 and 16.75 to 15.34, respectively.

Access Bank Zambia says the drop in Treasury bill rates entails that demand for government securities remains high.
“Last week’s extended drop in treasury bill rates is indicative of at least two things, demand for a government security is still strong even at these somewhat historically low yield rates. Moreover, Treasury bill rates still enjoy positive real returns averaging 4.3 percent points.
“The current yield rates have set up conditions favourable for a robust credit growth as lending rates currently provide a much better risk/reward scenario,” the bank says in its treasury market watch.
OMO is an activity by the central bank to give (or take) liquidity in its currency to (or from) a bank or a group of banks.
Similarly, First National Bank (FNB) in its daily newsletter says heightened levels of liquidity over K1.5 billion have resulted in a significant reduction in interbank borrowing and that Bank of Zambia has opted to stay out of the market, giving the public the reason to believe that it is comfortable with the current market conditions.
On the local currency market, the United Bank for Africa (UBA) says the Kwacha opened Monday’s session trading at K8.98 and K9.03 on the interbank at par with the previous day’s close.
In its treasury newsletter, the bank says the local unit traded defensive against the United States (US) dollar as corporates prepare to meet their monthly tax obligations.
“In the near term, we expect the local unit to trade in the range K8.95 and K9.15,” UBA notes.
Zanaco also says the Kwacha is expected to continue trading in a narrow range with a bullish bias should demand for fixed income securities remain high as investors attempt to lock in rates before a further likely fall in yields.


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