Ghanaian yields continue to move up in line with the recent uptick in headline inflation to end the year 2018 at 9.4% on the back of GHS depreciation and higher transportation fares. Investors are also wary of inflationary risks from GHS depreciation arising from the adverse impact of further Fed rate hikes on emerging market currencies.
The yield on the 91-day TB hardened by 3bps to 14.63% this week versus 14.60 last week while that of the 182-day TB moved up by 5bps to 15.09% this week versus 15.04% last week. The yield on the 1-year note jumped to 16.57% this week versus 15.50% last week. See the current yield curve of the Ghanaian economy in figure 1 below.
Government was still not able to raise the entire amount needed for the week despite the improvement in yields. The total of GHS534.12mn raised was marginally below the target of GHS553.00mn. Treasury yields are likely to continue to rise in the coming weeks as investors continue to seek higher yields to cushion them against upward inflation expectations. See market activity charts for this week below.
Government borrowing is expected to increase borrowing in 2019 to fund a higher fiscal deficit target of 4.2%, up from 3.7% in 2018. This would enable the government to increase spending in 2019 as the Akufo-Addo administration aims to ramp up infrastructure development and increase funding to flagship programs that formed the bedrock of campaign promises. See market activity charts for year-to-date below.