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Government raised K5.83 billion from last week’s Treasury bond auction as investors maintained strong demand for government securities, particularly medium-term maturities.
According to Access Bank market commentary, the September 25 auction attracted bids worth K8.63 billion, translating into an overall bid-to-cover ratio of 1.48 times.
The seven-year bond recorded the strongest demand, attracting almost twice the amount on offer with a bid-to-cover ratio of 1.98 times.
The two-year bond followed with a ratio of 1.72 times, while the three-year bond recorded 1.40 times.
Read more: Demand for Zambian government bonds hits record high, as bids climb three-fold
However, demand was weaker for longer-dated securities, with the 10-year bond recording a bid-to-cover ratio of 1.32 times and the 15-year bond attracting 1.07 times the amount on offer.
Access Bank said the pattern indicated that investors remained more cautious about committing funds for extended periods amid fiscal and debt sustainability concerns.
The auction also recorded a significant decline in yields across all maturities, reflecting improving macroeconomic conditions and expectations of lower interest rates.
The two-year bond yield fell by 199 basis points to 12 percent, while the three-year bond declined by 150 basis points to 12.59 percent.
The seven-year bond cleared at 13.75 percent after falling by 104 basis points, while yields on the 10-year and 15-year bonds declined by 100 and 105 basis points to 14.50 percent and 15.45 percent, respectively.
Access Bank attributed the decline, particularly on shorter-dated securities, to Zambia’s improving inflation outlook.
Annual inflation slowed to 6.1 percent in September, strengthening expectations that the Bank of Zambia could continue easing monetary policy.
“The outlook for the domestic bond market remains favourable, especially for securities with maturities of between two and seven years, where investor demand has been strongest and yields have compressed the most,” the bank said.
However, the bank cautioned that subdued demand for the 15-year bond indicated continued investor concerns over fiscal pressures, debt sustainability and the risks associated with longer-term investments.
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