adminafter only 25,6 percent of total bids were allotted.
A sum of US$4,5 million was raised from total bids of US$17,6 million – an indication of the liquidity crisis in the economy and high interest rates quoted on the bills.
Results of the first issue showed that the highest rate tendered for the 270-day bills was 25 percent while the minimum rate was 8,5 percent. Average weighted rate of allotted bids was 10,67 percent.
CBZ Bank were the underwriters, which means they have to raise the US$15,4 million for the programme.
Bills are money market instruments used to raise funding.
Zimbabwe’s money market has remained depressed due to lack of instruments, poor liquidity and reduced confidence.
Analysts said the bills were undersubscribed due to high interest rates tendered by investors.
“There is an indication that investors were bidding for higher interest rates judging from the highest, lowest and average rates tendered,” said a local analyst.
AMA bills came on the market in the absence of long-term paper and this is an indication that the market is still not ready for the long-term investment due to limited cash.
Analysts added that the market would continue to be dominated by short-term investments until liquidity conditions improve.
Zimbabwe faces a serious liquidity crisis following a decade of economic instability, which saw its gross domestic product shrink by about 50 percent.
This has been compounded by limited foreign capital inflows over a perceived country risk profile. The liquidity crisis has resulted in the high cost of finance.
With the central bank not well funded, financial intermediation by banks has suffered since the Reserve Bank does not have the capacity for lender of last resort.
But financial institutions in the country are negotiating several lines of credit that would be disbursed directly to industry at minimal rates, which is to improve liquidity conditions on the market.
AMA bills were the first to be issued on the market this year. Last year ZB was on the market to raise US$30 million and the bond struggled for support.
Agribank and FBC Bank were also on the market to raise US$10 million for the 2010/2011 agricultural season.
The bills were expected to help reduce the cost of borrowing and stimulate activity to provide depth for market trading and increase lending to the private sector.
Companies have been surviving on short-term financing of between six months and 12 months.
Online Reporter