Treasury yields will rise in the upcoming weeks, and quarter four will have the highest inflation.
With limited liquidity and the Bank of Ghana’s policy rate at 22%, higher rates on treasury notes are anticipated in the upcoming weeks.
According to Databank Research, the tightening monetary policy directive is continuing to put upward pressure on yields.
For instance, the 91-day yield increased by 38 basis points to 27.72%, while the 182-day yield increased by 56 basis points to 29.29%.
We anticipate investors will concentrate on T-bills in the primary market for re-pricing advantages in light of the policy rate hike. As banks adhere to the cash reserve requirement and to mitigate price losses brought on by offshore investors’ selloffs, we anticipate that investors will focus their attention on short-term bonds in the secondary market.
Continued upward pressure on yield
According to Databank Research’s market update, the hawkish monetary policy stance continues to put upward pressure on yields.
In an effort to control inflation, the MPC tightened its policy stance further with a record increase to 22% (+300bps). To further restrict market liquidity and reduce inflation and currency pressures, the Central Bank implemented other complementary measures.
It also stated that the fourth quarter of 2022 will have the highest inflation. Currently, the inflation rate is 31.7%. (July 2022).
“We anticipate a peak in inflation in the 4Q22, when the favorable base impact begins to take effect and food inflation pressures begin to decline because of harvest season. We anticipate the yields to increase in the upcoming weeks because of the limited liquidity and the policy rate of 22%.
upcoming offer for T-bills
The 91-day to 364-day tenors of this week’s T-bill offer are valued at 1.167 billion to refinance total maturities totaling 1.023 billion.
Last week, there were more transactions on the secondary bond market, with a total face value of 1.7 billion moved (up 1.35 percent week over week).
According to the study, the increase in trading activity was mostly the result of bank and offshore investor selloffs made in an effort to meet the Central Bank’s new cash reserve requirement.
We anticipate investors will concentrate on T-bills in the primary market for re-pricing advantages in light of the policy rate hike. As banks adhere to the cash reserve requirement and to reduce price losses brought on by offshore investors’ selloffs, we anticipate investors will focus their attention on short-term bonds in the secondary market.
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