The high yields on government securities will keep interest payments elevated.
According to the research arm of investment bank, IC Securities, the yields will resume the downturn in late 2023 with the anticipated International Monetary Fund programme as a catalyst.
After plummeting from a peak of 35.0% to between 18.5% and 26.8% by mid-March 2023, yields on T-bills have found renewed upward drive from the unexpected 150 basis points hike in the policy rate.
In the near-term, the government continued dependence on the money market, without an active primary bond market, will hold yields elevated around current levels of between 19.0% – 27.0%. However, IC Securities foresee scope for a renewed decline in late 2023 towards the 15.0% – 19.0% range.
“Our outlook is supported by the expected start of Ghana’s IMF programme, which will strengthen expenditure controls and reduce the Treasury’s borrowing requirements. Additionally, a sustained and potentially faster pace of disinflation will intensify the downward pressure on yields as the Treasury deepens its domestic liability management”.
It added that on the secondary fixed income market, “we continue to expect a quiet bond market as investors and traders struggle to price the new ‘payment in kind’ bonds while the higher risk-rating on the old bonds dampens their appeal. However, we observe strong secondary market activity for T-bills as investors cheer its exclusion from the domestic debt restructuring amidst sizable uptakes at the weekly primary market offers.”
Furthermore, IC Securities said it expect trading in T-bills to continue dominating the secondary fixed income market in 2023 amidst the lack of price action on the bond market. This will drive down trading yields with a spill over to the primary market for T-bills, supporting its downside view on yields by the end of 2023.