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T-bills: Yields to plummet further due to declining inflation

Source The Ghana Report

Treasury yields are expected to continue declining on the back 190 basis points decrease in headline inflation.

Ghana’s annual inflation rate fell to 23.1% in May 20224 from 25.0%, largely due to a sharp decline of 420 basis points in food inflation to 22.6%.

However, non-food inflation increased marginally by 10 basis points to 23.6% in May 2024 from 23.5% in Apr 2024.

Also, month-on-month quickened 140 basis points to 3.2% in May 2024.

Databank Research said “we expect the 190 basis points drop in the annual rate to broadly improve the inflation risk premium on yields. Thus, coupled with a favourable annual inflation outlook, we expect the decrease in T-bill yields to resume, though high government demand for funds may imply some headwinds to the pace of decline”.

IC Research also said “Given our forecast inflation sharply below 25.0% in May 2024, we opine that real yields remained in positive territory in the month under review”.

Interest rates fall to 24.85%

Interest rates tumbled once again across the yield curve, in line with falling inflation.

The 91-day yield eased to 24.85% from the prior week’s 25.03%.

That of the 182-day also went down by 9.0 basis points to 26.82%.

Similarly, the 182-day bill also declined to 27.81% from the earlier 27.92%.

Meanwhile, the government recorded 1.35% oversubscription of the T-bills sale, far lower than the 19.4% recorded the preceding week.

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