Money market liquidity tightens for second consecutive week

Money market liquidity conditions tightened for the second straight week, with current account balances at commercial banks falling by 7.9 percent to a three-week low of K5.32 billion during the week ending January 17, 2025, from K5.78 billion previously.

According to Zanaco’s weekly financial markets update, the liquidity squeeze was primarily driven by settlements for treasury bills purchased on January 9, 2025, amounting to over K4 billion, and payments for foreign exchange purchases by commercial banks from the Bank of Zambia (BoZ).

The report noted that the impact of these outflows was partially offset by government securities maturities and the absence of contractionary Open Market Operations (OMO).

Despite tighter conditions, the overnight lending rate remained steady at 14 percent.

At the first bond auction of 2025, held on January 17, demand for long-term government securities rose by 1.5 percent to K2.60 billion—a three-auction high—compared to K2.56 billion in December.

However, the subscription rate fell to 144.8 percent from 197.62 percent, reflecting a 38.5 percent increase in the offer amount to K1.8 billion.

“Signaling resistance to picking expensive money, 30.9 percent of total bids were rejected, with yields largely unchanged,” ZANACO reported.

Yields for 2-, 5-, and 10-year bonds remained at 16.5 percent, 20.8 percent, and 22.5 percent, respectively, while yields on 3- and 15-year bonds fell by five and 25 basis points to 19.95 percent and 23.25 percent, the latter hitting a 62-month low.

WARNING! All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express permission from ZAMBIA MONITOR.