Liquidity levels, inflation sway, treasury bills drop

THE local money market saw a further drop in interest rates on the sixth treasury bill auction, which is conducted every two weeks, as the Kwacha remains strong against the greenback.
Currently, treasury bills, which are short-term debt obligations backed by the government with a maturity of less than one year, segmented in 91,182,273 and 364 days, have varying interest rates of between 14 and 17 percent
According to financial market players, only the 182-days tenor remained unchanged at 15 percent while the three categories posted a dip.
First National Bank (FNB) attributes the drop to favourable liquidity levels standing at K1.43 billion and positive inflation outlook.
“Treasury bill rates dropped further, with the one-year [364-days] bill now at 17.47 percent from 19.25 percent at the last auction. Sovereign paper [treasury bill] is rallying from good liquidity and a tame inflation outlook. We are likely to see lower levels before we see an acceptable return in relation to inflation,” FNB notes in its daily newsletter issued on Friday.
Similarly, Zanaco says interest rates on the sixth treasury bills auction have marginally dropped on all tenors, from the previous auction
“The 91 and 182-days treasury bills are trading at 14 and 15 percent from 14.2501 and 15.0001 percent respectively.
“Rates on the 273 days are at 15.50 percent, a drop from 16.0001 percent with the one-year bill now at 17.47 percent from 19.25 percent at the last auction,” the bank notes in its treasury newsletter.
On the local currency market, Zanaco anticipates the Kwacha to continue trading in a thin range in the days to come, with surging demand expected to be matched by traditional month-end greenback supply.
The local unit is expected to trade in the range of K9.50 and K9.60 in the near-term.
Meanwhile, copper price on the London Metal Exchange (LME) slipped on Friday, but remained on course to mark its biggest weekly advance since mid-February on a weaker dollar and ongoing mine supply concerns.
Three-month copper on the LME slipped 0.5 percentage points to US$5,882 a tonne following a 0.7 percentage points gain in the previous session.

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