Recent data from GCB Capital Research indicates that T-bill yields may have reached their peak, with nominal interest rates appearing to plateau. This assessment follows a series of developments in the local treasury bill market.
Prior to the implementation of the DDEP, T-bill yields soared to approximately 35.5% reflecting the high-risk environment at the time. However, the subsequent three auctions marked a distinct shift, with the Benchmark 91-day T-bill settling at 18.52% during the 1842nd auction held on March 17, 2023.
Notwithstanding this downturn, the landscape has seen a reversal of fortune. Heightened inflation risks, resulting in negative real returns, along with macroeconomic uncertainties and an amplified appetite for short-term funds—largely due to limited government funding options—have collectively contributed to the rebound in yields.
In light of the recent decline in headline inflation, which has receded to 38.1% as of September 2023, GCB Capital Research suggests that nominal yields may be approaching their zenith. The forecast anticipates a continuing trend of disinflation, with an end-2023 inflation projection ranging around 30%±1%. This trajectory could potentially usher in an era of improved real returns on T-bills, thereby constraining the upward pressures on nominal yields.
The research firm foresees T-bill yields stabilizing in the vicinity of 30% to 33.5% for bills spanning maturities from 91 days to 364 days. Even as the Treasury’s primary market activity remains concentrated at the shorter end of the local currency yield (LCY) curve due to the allure of T-bill yields, it is expected that nominal yields will gradually ease as inflation subsides.
As investors and stakeholders closely observe the evolving economic dynamics, the prospect of T-bill yields assuming a more stable trajectory is poised to influence investment decisions and portfolio strategies in the country.