TRYNESS TEMBO, Lusaka
LAST week, the Bank of Zambia (BoZ) Treasury Bills auction was oversubscribed, attracting total bids amounting to about K1.7 billion against an offer of K1 billion as the Kwacha is expected to continue on a strong note
against the United States (US) dollar, financial market players note.
This means that there was demand for financial securities exceeding the total initial target that was offered.
Zanaco says out of the total bids, about K1.6 billion was allocated.
“The K1 billion government bonds tender was oversubscribed, receiving bids amounting to K1, 704.82 million and a total of K1, 644.82 million was allocated,” the bank says in its daily treasury newsletter.
The bank says the two and three-year yield rates remained unchanged while yield rates on the rest of the tenures slightly dropped.
On the local currency market, the Kwacha is likely to recoup some of its losses as the market is most likely to see a correction in demand and supply aggregates after Friday’s government bond auction.
Zanaco says the local currency weakened significantly on Friday after initially rallying to a two-month high against the dollar as corporate dollar selling and interest in the second government bond auction of 2017 continued to provide support for the Kwacha.
On Friday, the Kwacha opened trading at K9.30 and K9.35 but showed signs of weakness in the morning session to trade at lows of K9.38 and K9.43.
It also says the afternoon session witnessed increased dollar demand from the corporate buyers which led the Kwacha to capitulate gains made earlier in the week and it eventually closed the day at a low of K9.40 and K9.45.
First National Bank also says the Kwacha is expected to continue making gains against the greenback, supported by month-end obligations by most corporates.
The bank, however, says investors who were unsuccessful at the auction may opt to take out their liquidity by buying back dollars, which in turn may see a reverse reaction to the recent bullish trend experienced recently.
Similarly, UBA says the Kwacha is expected to be on the back foot against the greenback and is anticipated to trade in the range of K9.40 and K9.65.