The latest Treasury bill auction experienced unusually high demand for longer-maturity bills. During the auction held by the National Bank of Ethiopia on Wednesday, bids received for 364-day maturity bills were 75% higher than the government’s target.
Typically, investor interest is focused on one-month and three-month bills, with moderate demand for six-month bills and the least interest in one-year bills. However, this trend shifted in the recent auction.
For the one-year bills, the government aimed to raise 4.8 billion birr but received bids totaling 8.5 billion birr, a 75% increase over the target. This strong demand enabled the government to accept 5.8 billion birr, one billion more than initially planned.
Financial experts suggest that this shift indicates growing liquidity among banks, the main participants in these auctions along with pension funds.
A similar trend occurred with the six-month bills, which attracted 15.1 billion birr in bids against a target of 13 billion birr.
As a result, the government accepted 16.5 billion birr for this maturity, exceeding its target by 27% and surpassing the original amount it intended to accept.
Overall, the government aimed to sell 32.5 billion birr in treasury bills at the bi-weekly auction but ultimately accepted 37 billion birr due to robust demand.
Despite the government’s objective to lower borrowing costs, the auction saw an increase in the weighted average yield.
The accepted yield rose to 15.8%, up from 15.1% in the previous auction two weeks earlier. Notably, the average interest rate for the one-year bill increased to 18% from 15%. The latest auction also highlighted a significant surge in investor demand for yield, with long-term bills attracting rates as high as 30%.
