Economy
Gold-Fed Cash Drags Treasury Yields Far Below Policy Rate
Addis Fortune · 13 hours ago · Read the Full Story on Addis Fortune
AI SUMMARY
The Central Bank maintains its policy rate at 16pc while gold-driven liquidity injections push Treasury bill yields and government borrowing costs significantly lower.
- The National Bank of Ethiopia maintains its policy rate at 16pc.
- At the September 16 Treasury bill auction, the federal government borrowed at an average rate of 5.36pc, with four-week bills clearing at 1.95pc.
- Interbank loans trade at the 13pc corridor floor, while the Central Bank's own deposit operations cleared at 3.25pc.
- Reserve money grew by 87.2pc in the first quarter of the year, driven primarily by the Central Bank's gold purchases.
- September inflation stood at 14.9pc, placing short-term Treasury bill returns at a negative real value of about minus 13 percentage points.
- Demand for Treasury bills remained high, with bids reaching 50.6 billion Br against an offer of 15.98 billion Br on September 16.
- The IMF expected a plan by the end of September to phase out the gold premium paid to miners, which sits five to 15pc above international prices, but none has been published.
- Financial analysts and banking executives have called for the Central Bank to halt gold purchases, establish a standing deposit facility, and introduce longer-term Treasury bonds to normalize interest rates.
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