Pangaea Securities (Zambia) Limited

Information on the


Zambian Treasury Bills

The Zambian Financial Markets offer short term debt instruments that have (I) little to no default risk (II) low price risk and (III) fair marketability. Treasury bills are issued by the Bank of Zambia on behalf of the Zambian government on a discount basis. The bills are available on both a competitive and a non-competitive basis.

In the process of liberalizing the economy, the Bank of Zambia has now resorted to a competitive pricing policy, in which the price is established through a weekly Tender Process. Currently, Treasury Bills of maturity period of 28, 91, and 182 days are available on an auction basis. Bidders had in their bids by Thursday, 10:00 hrs for availability the following Monday.

There are two methods of purchasing Treasury Bills via Pangaea Securities:

Competitive Bid: The Bank awards the highest prices (smallest discounts) first, in order to achieve the best possible interest rate. In this way, interest rates on the Treasury Bills are determined by the bidders themselves.

Non-competitive bids: Non-Auction Bills are also available for "smaller" investors at each auction with the rate determined on the basis of the average rate of the competitive bids. Non-competitive bids may be made for amounts between Kw 1 and 20 million.

Under the current legislation, the income earned on Treasury bills is subject to 15% Withholding Tax at the Bank of Zambia. The bills are re-discountable at the bank, at a penalty, but can also be traded in the market. They can also be used as collateral for obtaining loans.

The current T-bill rates available are at the Pangaea Weekly Lusaka Stock Exchange Market Report.

Zambian Government Bonds

The Zambian Financial Markets also offer medium term debt instruments that have (I) little to no default risk (II) low price risk and (III) fair marketability. Government Bonds, with tenors of 12 and 18 months, are auctioned by the bank of Zambia on behalf of the Zambian Government.

The tenders are normally held by 10:00 hrs on a Tuesday, every 4 - 6 weeks, depending on the borrowing needs of the Government. The size of each Tender depends on the amount of money the Government needs to raise. The results of the auction are communicated to the bidders on the Wednesday following the auction. The settlement is done three days after the auction on a Friday.

There are two methods of obtaining Treasury Bonds via Pangaea Securities:

Competitive Bids: The Bank of Zambia uses the Dutch Auction Tender System, in which successful competitive bidders receive the yield at which they bid. The minimum acceptable competitive bid is K20 million. There are no restrictions on the number of bids that a bidder may place. The bids are chosen starting with the lowest annual percentage yield.

Non-competitive Bids: Up to 10% of the Tender on issue is reserved for non-competitive bidders per auction. This is to facilitate the participation of small personal investors and range in amount from K1 million to K20 million. The non-competitive bids are allocated at the weighted average yield struck in the competitive portion of the particular auction.

Semi-annual coupon interest payments will be paid and the bonds will be redeemable upon maturity at the Bank of Zambia by physical presentation of the certificate. Interest income earned on the bonds is not subject to Tax under the current legislation.

The current bond rates available are at the Pangaea Weekly Lusaka Stock Exchange Market Report.

The bonds are transferable by endorsement at the Bank of Zambia and hence can be traded in the market. The Bonds will be listed on the Lusaka Stock Exchange, and therefore there will be a central and market based avenue for investors to liquidate the bonds before maturity if need arises. It will also provide other investors an opportunity to purchase bonds in an organized secondary market. However, buyers should be aware that the market is in its infancy and liquidity is currently limited.

Individuals requiring more information on purchasing Zambian Government Bonds should contact Pangaea Securities (Zambia) Limited at Tel: (260 1) 220707 / 238709 / 238710; Fax: (260 1) 238708 / 220925; E mail:

Pangaea is also sometimes able to source hedging facilities by Forward Contracts to minimize the exposure to foreign currency risk. The contracts are structured on the basis of interest differential and thus may enable net returns of over 30%. Short term contracts are available with varying rates. Pangaea offers investment advice and can place bids on your behalf, thus extending these attractive returns to you.


Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or options or futures. Pangaea Partners (Zambia) Limited, Pangaea Securities Limited, their affiliates, directors, officers and employees may have a long or short positions in Zambian securities including T-bills and T-bonds.

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