IN BRIEF

• GHANA
  Fixed Income: Investor demand in the primary market for Ghanaian Treasury bills edged up by 1.1% m/m in August 2024. However, the Treasury increased its T-bills target by 2.4% m/m, thereby widening the uncovered auction to 10.6% or GHS 2.25bn (vs 9.5% or GHS 1.96bn shortfall in July 2024). We observed that while the net issuance target for August fell by GHS 539.3mn m/m to GHS 2.8bn, the refinancing obligation for the month surged by GHS 1.0bn to GHS 18.5bn, preventing a sharper drop in yields. We estimate the total T-bill maturities in September 2024 at GHS 22.1bn, representing a 20.0% (or GHS 3.7bn) m/m upsurge in refinancing obligation. This will require an average weekly bid of over GHS 4.4bn to fully cover only the maturities without accounting for the net issuance target. Given the prevailing demand conditions, we foresee lingering risk of uncovered auctions with stickiness in yields, although the maturity coverage may be achieved.  On the bond market, we saw emerging offshore interest in the General category DDEP bonds as FED’s dovish tilt revives risk-on appetite while PIK structure nears end, making easier pricing.   
  
  Currency: The Cedi’s fortune improved further in August 2024 as the pace of depreciation slowed for the third straight month on the back of a globally weaker US Dollar and enhanced Central Bank FX sales. The Bank of Ghana conducted surprise 7-day FX forward sales in four separate transactions, selling a combined USD 119.1mn against a target size of USD 215.0mn. We believe the BOG’s upscaled support was against the FX risk associated with the GHS 6.1bn coupon payment on the DDEP bonds. In the month ahead, we anticipate continued stability with range-bound drift as a dovish FED continues to restrain the US Dollar with support for the Cedi. However, the drought-induced need for higher food import could pose FX risk.

  KENYA
  Fixed Income: Kenyan Treasury yields declined in August 2024 on the back of ongoing disinflation, Central Bank’s policy rate cut, and continued stability of the Shilling, although investor appetite for the T-bills softened. We believe the demand dynamics reflect emerging portfolio rebalancing in favour of slightly longer tenors to lock-in higher yields as yield downturn begins despite lingering fiscal risk. In the month ahead, we expect continued decline in yields as a well-anchored inflation expectation combines with the dovish monetary policy outlook to lower investors’ interest rate expectations.
  
  Currency: The KES was relatively stable against the US Dollar in August 2024 despite the raft of credit downgrades by Fitch and S&P after Moody’s’ downgrade in July amidst the lingering fiscal risks. Foreign exchange reserves also stabilized with an upward bias (+1.0% m/m) to USD 7.3bn (3.8months of import cover) amidst ongoing disinflation, widening real yields and carry trade opportunity for offshore investors. The KES closed the month with a 0.6% m/m gain vs the USD with prospect for continued stability, albeit with lingering fiscal risks. Given the FED’s dovish tilt, we expect a pickup in risk-on positioning by offshore investors with KES as a likely beneficiary.

  NIGERIA
  Fixed Income: The Treasury’s cumulative target of NGN 626.1bn attracted total bids worth NGN 1.5tn, exceeding the target by 142% as investor appetite for the short-term securities remained strong. However, the Treasury accepted only NGN 507.1bn (one-third of the bids), representing 81.0% of the target amount and the T-bill maturities for the month. Yields fell across the curve with the stop rate for the 91-day and 182-day tenors dropping by 30bps each to touch 18.2% and 19.2%, respectively. The 364-day stop rate declined the sharpest, plummeting by 120bps m/m to 20.9%. In our view, the downtick in yields reflects improved sentiment occasioned by the drop in annual inflation for July 2024 with further disinflation expected in the months ahead.
  
  Currency: The Nigerian Naira was largely stable in August 2024 as the Central Bank injected USD 815.4mn via retail Dutch Auction System against total bids worth USD 1.2bn. The successful bids allotted were quoted at a USDNGN range of 1,495 – 1,650/USD, providing a forward guidance for the USDNGN FX rate. Consequently, the Naira appreciated by 0.6% m/m against the US Dollar in August 2024. We foresee continued stability in the month ahead as issuance of USD 500mn domestic USD bond attracts offshore flows. Inflation commenced a downturn in August and we expect further declines in the months ahead to ease the selling pressure on the Naira.