IN BRIEF

• GHANA
  Fixed Income: Investor demand for Ghanaian Treasury bills strengthened in September but the Treasury’s increased target outweighed the demand conditions, resulting in a wider shortfall in uptake vs target. Consequently, Treasury yields ticked higher across the curve with a potential to remain unresponsive to the latest policy rate cut in the immediate term due to the Treasury’s higher borrowing need. We note that the 200bps cut in the policy rate to 27.0% has boosted the pricing appeal of T-bills relative to BOG bills and could potentially improve demand for the former. However, we are less optimistic about an immediate decline in yields for T-bills as the upside risk from the Treasury’s strong borrowing pressure remains high.
  
  Currency:
• The Cedi’s improved fortunes extended into September 2024 amidst continued Central Bank support via the 7-day FX forwards (USD 101.1mn | +11.1% m/m), the bi-weekly 30-day forwards to oil importers (USD 20.0mn) and the FED’s dovish tilt which revived risk-on positioning among offshore investors. However, we saw an uptick in FX demand in the final week of the month as importers start to stock up ahead of the year-end festivities. We view the rising FX demand by importers ahead of the year-end festivities as a risk to the Cedi’s stability in 4Q2024. This could be compounded by safe-haven demand for FX ahead of the elections in December. However, we expect sustained BOG intervention to mitigate the depreciation risk ahead.

  KENYA
  Fixed Income:  Investor appetite strengthened for the 91-day and 364-day tenors, supporting a m/m upsurge in total bids for Kenyan Treasury bills in September 2024 with a slight downshift in the yield curve. Yields continued the downtick for the second straight month, albeit slower than the prior month and more sluggish than expected despite risk-on appetite from offshore investors and dovish signal by the Central Bank. We expect the CBK to sustain its dovishness at the October MPC meeting with a resultant downward pressure on yields.
  
  
  Currency: The Kenyan Shilling was virtually static in September 2024 holding firm around 129.2/USD as easing global interest rates provided external support amidst high and sticky domestic interest rates. Foreign exchange reserves also improved by 9.2% m/m to USD 8.0bn (4.1 months of import cover), reassuring the market of sufficient FX liquidity. Real interest rates remain attractively high both for domestic investors (average: 12.0%) and non-resident investors (given the YTD USDKES appreciation of 21.1%). We believe the strong macro fundamentals will continue to anchor USDKES stability in 4Q2024 as investors anticipate the next MPC decision on 8th October 2024.

  NIGERIA
  Fixed Income:  Investor demand was generally strong relative to target despite a noticeable softening post-MPC rate hike later in the month. The auction outcome translated into a bid-to-cover ratio of 3.2x (vs 3.0x in August), indicating a strong demand although with MPC-induced downside risk. Yields partly reversed the early-month decline after the Central Bank surprised the market with a 50bps hike in the policy rate but closed with a m/m decline.  We expect the MPC-induced upside risk to Treasury yields to be capped by the favourable demand conditions for the T-bill offers. 

   

  Currency: The Nigerian Naira was volatile against the US Dollar in September, culminating in a widening of the spread between the parallel market rate and the official FX rate. We view the Central Bank’s unrelenting hawkish posture as FX-supportive. We expect the latest Naira liquidity tightening measures to anchor the USDNGN FX rate around the 1,600/USD mark on the official market. However, we view the negative real interest rates as undermining the attractiveness of Naira-denominated assets.