BIDDERS were this week reportedly dodging 181-day treasury bills (TBs) re-introduced by the central bank to bolster its reduction of key accommodation rates, sending a clear indication investors are unwilling to lock their funds for lengthy periods due to unce
rtainty pervading the market.
Dealers said only banks, awash with cash after a drastic reduction in statutory reserve ratios and the reduction in accommodation rates, bid for the long-dated paper.
“Investors are shunning the six-month papers,” a primary dealer said on Wednesday. “It’s mainly because of the tenor and the rate — around 218% per annum. Investors are resisting,” the dealer said.
“Investors do not want to lock themselves for longer periods given the uncertain economic environment,” said Kingdom Stockbrokers (KSB) in a weekly review to investors.
The central bank allotted $929 billion worth of bids in Wednesday afternoon’s tender after accepting all bids. The average rate was 243,11%.
All bids amounting to $123 billion had been allotted in the morning tender with an average rate of 233,61%.
The central bank weakened its monetary policy last week, a move analysts said had opened “floodgates for speculators” and fuelled a rampage on the equities and parallel foreign currency markets.
The Reserve Bank governor Gideon Gono cut the accommodation rate to 300% for secured accommodation and 350% for unsecured accommodation, from 850% and 900% respectively.
Gono said the adjustment to the accommodation rates had been made “so as to balance the virtues of anti-inflation demand management interventions with the continued flow of credit to the productive sectors of the economy”.
“These accommodation rates will be reviewed in line with the inflation outlook,” Gono said.
The money market has consequently experienced surpluses, triggering a slump in rates. The market was up $1,2 trillion and $250 billion on Monday and Tuesday respectively. It opened Wednesday $6,8 trillion in surplus.
Since the beginning of last week, equities were very bullish driven by the fall in interest rates, KSB said in its commentary.
The key industrial index last week closed 83,37% up at 161 008,12 points, with the mining index jumping by 94,66% to close at 65 393 84 points.
There was a market wide rally in equities from Monday to Wednesday last week before profit takers set in on Thursday on selected middle and lightweight counters.
The bull-run had been sustained through this week, although the momentum of the rally had somewhat slackened on profit taking.
“Going into the future, we are expecting some profit taking to continue in selected counters.
The market will continue on an upward trend driven by gains in quality counters that are expected to report good results,” said KSB. — Staff Writer.