Wednesday, May 22, 2024

Warning signs for Zambia as Eurobond curve becomes more inverted


Zambia’s Eurobond Curve
Zambia’s Eurobond Curve

Zambia’s Finance Minister Margaret Mwanakatwe said this month there’s no need to worry about the government’s debt load.

But investors are sending the opposite signal.

The yield curve for the southern African nation’s Eurobonds, which are the worst performers in emerging markets in the past year, is increasingly inverted-meaning that shorter-dated securities have higher yields than those with longer maturities.

That’s a rarity and often occurs when countries are already in default, with one example being Venezuela.

Yields on Zambia’s $750 million of bonds due in 2022 have climbed almost 500 basis points since early February to 17.45 percent.

Its 2027 bonds trade at 15.8 percent.

No other country that’s not in default has yields as high.

The inversion is partly because the shorter bonds have a bullet maturity and have to be paid back in one go, while the longer ones amortize, making them less risky, according to Neville Mandimika, an analyst at Rand Merchant Bank in Johannesburg.

But it also suggests traders are getting more nervous, he said.

“That yield curve inversion can be seen as an indicator of how concerned investors are about the situation,” he said. “In times of extreme debt concerns, the less risky bond will price at a premium to the bullet bond.”

Finance Minister Margaret Mwanakatwe said in an interview with Bloomberg TV on April 12 that Zambia is borrowing to improve the country’s infrastructure and the debt should be seen as an investment.

Africa’s second-biggest copper producer is battling to shore up its finances and has been in on-off talks with the International Monetary Fund for more than a year about a loan.

Bank of America says it could be forced into restructuring if it fails to get an IMF bailout or friendlier terms on bilateral loans from China, which it’s trying to renegotiate.

Investors are also watching dwindling foreign-exchange reserves.

They’ve halved in the past three years to $1.5 billion.

They now cover barely 10 percent of Zambia’s external debt, which is the lowest ratio among all African nations that have sold dollar bonds, according to data compiled by Bloomberg.



    • Not easy to understand if you background is drinking in Chawama…..
      We warned you… ati you are bitter

      Get rid of that clueless moron

    • What have we been telling you?
      I would like to hear from my colleagues who have voraciously defended the irresponsible borrowing of this Lungu led PF.
      Come 2022 and people will be crying. We are already feeling the pinch and it will only get worse.
      We have clueless greedy people in power. Sadly the deteriorating situation will only make them more determined to hold on to power, by hook or by crook or by the bullet because they are afraid of being held accountable.

    • When it comes to things that make or break our future will only have a few comments it so disheartening to see that on things that matter the most people won’t comment but when it comes to what gbm or CK said you will see thousands of comments ,why is Zambia like this really we keep on urging on things & people that don’t matter people we are not even sure hold even just a mare G12 certificate .Zambians let’s be serious when the economy collapses it does not matter if you work hard or you have a businesses it will affect you.Some of you are so brain washed you have a mindset of a ruling politician it should not matter who is president whether it’s a woman, Whiteman, Tonga, Bemba e.t.c as long as they do what is right for Zambia

  1. There is no problem…..those making noise are working for HH or are imperilialists who want to control our mineral resources……

  2. Yeah, yeah…..mmmmmm, very bad.

    HOWEVER THIS DOES NOT DETRACT FROM THE FACT THAT UPND is the single factor in investor confidence depleting. They are more concerned on stability that will ensure problem resolution. Zambia going into a tribal war, must really be giving investors jitters.

    This is an article making assumptions and attaching them to PF, rather than world economy. What really are investors worrying about default…..they would love nothing more than that so that they charge interest + default rates. Milking the cash cow that is Zambia to them! How come UPND, are not coming up with solutions in parliament?

    • You are not normal, not even a bit. Am trying to understand how you are factoring in UPND in a PF mess. And how can you say this article is making assumptions when they are telling you what is factually on the ground regarding our useless Euro Bonds! And how come the world economy is only badly affecting our particular bonds?” tata what do you do there zoona are you a baby sitter for your aunt’s kids or what? How many times have solutions been offered to you boneheads and you spit into the face of the solution givers?? Awe bane let us be serious, get your head out of Sunday Chanda’s bum and try reasoning like an adult. Gosh!

    • Coming up with solutions ????

      PF are too clever , they know it all, UPND have been advising them for the past 4 years , but were apparently just bitter

    • Patriot Abroad, you’re a retard. If the UPND MPs were able to influence parliament, we wouldn’t be in this mess in the first place. You keep on trying to blame others for the PF mess,but I think if you are indeed a patriot you should be true to yourself and other countrymen. Have you ever stopped to ask yourself how much of this Eurobond money was actually spent on what it was borrowed for? What’s destroying our country is the fact that the PF is useless and people like you defend them just to win an argument. Let’s get realistic for once and accept the HUGE problems facing this country.

  3. This is the part where our resident PF supporters go to chill in other websites waiting for a story that will talk about HH and other non economic issues. At least Patriot Abroad had the balls but as expected his comment was m0r0nic. PF not only has extremely dull leaders but equally dull supporters. Fact.

    • Yes in places like this is where you find the mother of all take covers by the resident LT PF

      …..but some times if you call them out by name, they briefly appear to take a gulp of air before going under ground again

      BR BAMBA, kudos, UPND cader , njimbu ??

  4. Issues PF and its supporters can never comprehend. A few technocrats, if at all there any, unfortunately cannot tell the truth for fear of being labeled opposition and losing their jobs. We are in dip as a country.

  5. UPND danderheads and sycophants trying to change the narrative of losing GBM who has promised to dismantle HH and the UPND structures in Kaputa and other areas… That’s the issue at hand.. Muyopa chani vi UPND… GBM has given you free consultancy that the biggest problem in UPND is the Supreme leader HH himself..

    • if HH is the problem it is our problem not yours worry abt wat the Zambian pipo are worried of their livelihood.

    • Mulibasushi tata, can’t even spell dunderhead, we don’t expect you to understand nangufimo. PF quality, no surprises.

  6. Investors in Zambia have done very well with unbelievable returns on what they were told is not worth the risk. Heard of Investors pulling out of Zambia? No. Instead, they are expanding. Tells you something about the speculative tendencies of financial advisories like Bloomberg and their local vampire acolytes.

    It’s always the case that those in the secondary Bond market have to drive up interest to make a return on the base interest price due in 2022 when acquiring the bonds. Secondary market is in a frenzy to maximise returns on the base interest price coz when Bond gets paid in 2022, bet of default no longer flies leading to wailing losses for the vampires and speculators. Looking at Bloomberg as a sage is lack of patriotism and belief in the progress Zambia is making. Those who do…

  7. Debt servicing has left govt little money to meet obligations – BoZ
    By Stuart Lisulo

    Government’s huge debt servicing has resulted in little money left in circulation to meet several critical obligations, Bank of Zambia (BoZ) governor Dr Denny Kalyalya has observed.
    And Dr Kalyalya has ruled out any possibility of the central bank printing more money to help government meet its st

  8. The story about the Zambian economy is not different from the story of a settlement in Lusaka called Kaunda Square, which is now called “Ka Sewer Square” because of the ever overflowing fresh sewer.
    Kaunda Square has graduated from a planned settlement to an unplanned one. This is Nkandu Luo’s constituency by the way. The choice of MP speaks volumes about the human degradation you have in Ka Sewer Square! Unplanned borrowing is dangerous!

  9. while we talk of borrowing as the main problem and mismanagement of the little resources as the cause of economic threats we now have, we all have something we negatively contribute due to our still colonised minds. While China and India are busy setting goals to be self reliant by encouraging their people buy their local products, and invest in their countries then grow such indigenous companies into global giants, as Zambia we are just doing the opposite. proud of having 10 buses a day going into South Africa to go and buy petty things.

    where people are thinking and working politicians don’t contral economies but business does. actually politicians should be controlled by business community as the gay business communitycontrolled Obama. The more we think Salaula is the best cloth,…

  10. Gucci should be our brand, Nike our dream the less we help morons in state house. All we export is copper the rest we import even things that are produced within Zambia. with our mentality not even a genius economist can save Zambia. All our comments are about borrowing less few mention measures to grow our reserves. Let’s go pure Zambian . thanks to trade Kings they are putting us on the map in the region at least.

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