Bond Market Yields Increase

Courage Kingsley Martey

YIELDS FROM the country’s bond market rose with the Ghana Fixed Income Market’s two-year Treasury note going up from 15.33 per cent in August 2021 to 17.5 percent in September 2021.

The medium-term maturities including the three-year, five-year, as well as six-year, and seven-year, bonds also rose from 13.29 percent, 13.48 percent, 18.51 percent, and 17.6 percent in August to 13.71 percent, 15.49 percent, and 19.4 percent respectively in September 2021.

Long-term bonds such as the 10-year and 15-year similarly increased to 19.02 percent and 19.63 percent in September 2021 from 18.91 percent and 18.22 percent in August respectively. However, the 20-year bond remained unchanged during the period at 19.54 percent.

Senior Economist with Databank, Courage Kingsley Martey, said yields have been under upward pressure since the late third quarter, especially beginning September 2021.

This he said was largely due to the cedi-liquidity crunch as well as the US Fed Taper, which is set to be next month.

“There are two main reasons for this upward pressure on yields. First, cedi-liquidity is quite tight on the market since September. This is fuelling selling pressure on the bond market across maturities and exerting upward pressure on yields.

Secondly, the US Fed announced its taper timeline in September, expecting to start reducing the size of its bond purchase programme from November this year into mid-2022. This announcement has expectedly heightened non-resident aversion to securities of emerging and frontier markets. These dampened appetites have also created some selling pressure and increasing bond yields,” he stated.

Mr. Martey however noted that the government could deal with this is by building buffers, to enable the fiscal authorities navigate the tight conditions without undermining their fiscal consolidation and growth revitalization plans.

“For the monetary policy authorities, it might be appropriate to stand ready to use the interest rate channels as a means to sustain the appeal of domestic financial securities in order to reduce the shock of foreign portfolio outflows,” he said.

BY Jamila Akweley Okertchiri