By Ellen Hambuba
Government bond auctions in Zambia are attracting strong investor demand, a financial and economic analyst says, noting this could help lower the country’s borrowing costs.
ANDREW CHIBUYE, Senior Country Analyst at PricewaterhouseCoopers –PwC-, says recent auctions have seen investor bids exceed the amount of securities offered by Government.
Mr. CHIBUYE explains that Government raises funds through Treasury Bills and Government Bonds, sold to investors via auctions conducted by the Bank of Zambia.
He says Treasury Bills are short-term instruments that typically mature within a year, while Government Bonds are longer-term securities, running for up to fifteen years.
Mr. CHIBUYE notes that when auctions are oversubscribed, investor demand exceeds the securities available, allowing the Government to borrow at lower interest rates.
He adds that key investors in the domestic government securities market include banks, pension funds, asset managers, offshore investors, and retail participants.
Analysts measure demand strength using the bid-to-cover ratio, which compares the value of bids received to the amount of securities offered.
Mr. CHIBUYE says the strong bond auction results may reflect confidence in Zambia’s economic outlook, adequate liquidity in the financial system, and the relative safety of government securities.
He says consistent demand for government securities can make public financing more predictable while supporting stability in the financial markets.
