Election certainty could extend Zambia’s world-beating bond rally, Citi says

Zambia’s local currency bond market could extend its world-leading rally if President Hakainde Hichilema secures a decisive victory in the country’s August 13 presidential election, according to Citigroup Inc.

The investment bank said policy continuity following a clear election win would likely strengthen investor confidence, attract fresh foreign inflows and support further gains in Zambia’s sovereign debt market.

Zambia’s kwacha-denominated government bonds have returned 36 percent in US dollar terms so far this year, making them the best-performing emerging market local currency bonds tracked by Bloomberg. By comparison, the Bloomberg Emerging Market Local Currency Government Index has returned just 1.35 percent over the same period.

While the rally has been driven by improving macroeconomic fundamentals and investor-friendly reforms, some investors remain cautious ahead of the election, preferring to wait for the outcome before increasing their exposure.

Citigroup strategist Katie Kironde said a “clear win” for Hichilema would likely encourage offshore investors to participate in the government’s next bond auction, scheduled shortly after the election.

“That renewed foreign bid would likely also drive the curve lower in the near term,” Kironde wrote in a note to clients.

Yields at Zambia’s June 26 government bond auction ranged from 14.25 percent on short-term securities to 17.5 percent on longer-dated maturities, while the country’s benchmark 10-year bond yield has declined by about 70 basis points this year.

Hichilema’s administration has earned investor support through fiscal consolidation, economic reforms and progress in restructuring Zambia’s external debt after the country became Africa’s first pandemic-era sovereign default in 2020.

The recovery has also been supported by stronger copper exports, helping revive economic growth and boosting confidence in Zambian assets.

Foreign appetite for local bonds accelerated after authorities eased restrictions on non-resident ownership in January, allowing greater participation in government debt auctions.

Investor returns have been further enhanced by the kwacha’s appreciation. The currency has gained about 20 percent against the US dollar so far this year, after strengthening by roughly 25 percent in 2025.

Kironde expects the kwacha to remain broadly stable within its current trading range through the election period. The currency traded at 18.44 per US dollar on Wednesday, its strongest level since May 28.

“A stable currency has historically tended to support the incumbent at the ballot box,” she said.

For investors, the election is expected to serve as a key test of Zambia’s reform agenda. A decisive victory for Hichilema is widely seen as reinforcing confidence in the country’s fiscal discipline, macroeconomic stability and long-term investment outlook, potentially extending one of the strongest bond rallies across emerging markets.