NBM Capital has said Malawi’s liquidity position in the financial system has significantly improved closing with a surplus of K3.9 billion above the required K36.4 billion.
The financial company, a subsidiary of National Bank of Malawi, said the Treasury Bill (TB) issue of 21 May 2013 was fully subscribed, attracting about K5 billion from the K5 billion that was announced.
NBM Capital said interbank borrowing equalled discount window borrowing at an average of K4.4 billion per day.
“With the positive liquidity outlook and about K2.4 billion in TB maturities this week, we should expect the financial market to have a surplus position which would sustain relatively moderate rates.
“Investor preferences continue to hover in the middle to long tenor with the 182 day tenor attracting 65% of the total applications. Despite this skewedness, the authorities allotted the applications in full,” said NBM Capital.
Another market analysis company in the financial sector, Alliance Capital Limited said the primary Treasury bill market recorded a turnaround in yield across all tenors after 6 consecutive weeks of exhibiting a downward trend.
TB yields reversed the downward trend of the consecutive two weeks and gained about 100 basis points across the tenors to close at 33.36%, mainly on the back of a more pronounced uptick in the 91 day tenor which gained 157 basis points to close at 31.98% from 30.41%.
However, NBM Capital highlights that despite the gain, the current yields on TB give negative returns against an inflation rate that stands at 35.8% as of March 2013.
“In anticipation of downward run in inflation in the coming months, investors seem to have chosen to lock up their funds in the middle – long tenors in order to limit damages. Besides, the market expects a downward review on interest rates as the outlook does point that direction as inflation continues to fall in the wake of crop harvest and tobacco & tea sales seasonal period,” said NBM Capital.