Bond auction under scrutiny


FINANCIAL market players on Friday eagerly awaited the path that the last bond auction for this year will take in a fairly liquidity money market of over K2 billion.
This is on account of anticipated foreign investors that were expected to participate in a bond auction on the day due to attractive macroeconomic fundamentals.
Once offshore investors got on board, this could result in increased dollar inflow, thereby boosting the Kwacha.
Currently, securities which are financial instruments that represent ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership as represented by an option, are in the range of 23 percent to 26.8 percent.
First National Bank (FNB) daily newsletter says, “The final bond tender auction for the year is finally here. After the budget reading [November 11], this auction will prove to be a tricky one as it remains difficult to predict the direction which yields will take.”
FNB notes that given the current high-interest rate environment and the current liquidity levels of up to K2 billion, the five-year and seven-year papers are likely to attract the highest bids.
“This could, in turn, see yields on the two securities drop slightly. On the other hand, the government has indicated their appetite in long-term securities giving us reason to believe that yields are set to trend higher. It will be interesting to see what direction yields take in today’s [Friday’s] auction which will pave the way for next year,” the bank says.
On the local currency, Zanaco says that with upward momentum having switched, the Kwacha was poised to make some gains on the day.
Zanaco believed that the demand experienced in the last two days (Wednesday and Thursday) had been filled and that stakeholders who have been holding on to United States dollars would start to offload their long position which would ease pressure on the Kwacha.
“Today [Friday], the local currency trading is expected to be the bullish of two currencies supported by dollar conversions by companies preparing to pay salaries and other month-end costs as well as offshore players taking part in a bond auction on November 18,” the bank noted in its daily treasury.

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