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0 The Fixed income Market is poised for gradual yield decline amid aggressive treasury stance and possible bond issuance.
According to Databank Research’s Quarterly Report, it anticipates a broad-based downward trend in yields across the LCY yield curve from the second quarter of 2025 year-end, underpinned by improving macroeconomic fundamentals and more constructive investor sentiment
“We anticipate a broad-based downward trend in yields across the LCY yield curve from Q2 ’25 [quarter 2] year-end, underpinned by improving macroeconomic fundamentals and more constructive investor sentiment. However, elevated T-bill [treasury bills] maturities and the prevailing negative real return could keep yields ranging between 16.50% and 15.00% in Q2 ’25”.
It also said the high Open Market Operations (OMO) interest rates continue to pose a risk, providing a competitive alternative for key players in the T-bill market, like the commercial banks.
It pointed out that investor optimism is expected to strengthen on the back of market-friendly policy reforms and a clearer fiscal consolidation path.
“Given the government’s commitment to fiscal discipline, outlined in the 2025 budget with a GHS10bn cut in expenditure and revenue increased by GHS37bn is expected to reduce reliance on short-term funding and support a sustained improvement in sovereign risk re-rating. Disinflation is expected to persist, aided by base effects, improved commodity prices, and a relatively stable exchange rate may likely anchor investor expectations for lower yields, particularly at the front and belly of the yield curve”, it added.
Outlook of Bond Market Uncertain
On the bond market, Databank Research maintained a cautiously optimistic outlook. “While the 2025 budget signals the possibility of issuance by year-end, we do not envision any issuance in Q2 ’25 [quarter 2, 2025] as prevailing yields at the front of LCY remain too high to support cost-effective long-term issuance. Investors are likely to require a steep risk premium, making long-tenor issuance unattractive at this stage. As such, we expect the treasury to maintain a cautious stance on long-term bond issuance while aggressively trimming T-bill yields”.
T-bills Bids estimated at GHS136.87bn in Q1
Meanwhile, total bids for T-bills were estimated at GHS136.87 billion across the 91-day to 364-day bills. This is against a target of GHS83.74 billion
The Treasury accepted GHS95.01 billion.
Notably, demand for the 364-day bill surged 171% quarter-on-quarter to GHS19.77 billion, as investors sought to lock in relatively higher yields amid a broad decline in interest.
