Interest rates to reach 30% soon

Following the expected rise in inflation, interest rates are expected to go up to 30% or above by a week or two, some analysts have stated.

Secondly, some foreign investors are liquidating and repatriating their investments, due to financial challenges facing the country.

This will keep the government’s borrowing costs still high because investors will only buy government instruments that have high yields.

According to the latest auction of government Treasury bills, interest rates surged marginally on the domestic market to nearly 29%, enabling the government to achieve a 16% oversubscription of its Treasury bills sale.

The government thus raised ¢1.33 billion from the sale of the short-term securities, as against the target of ¢1.153.

Interest rates on the 91-day T-bill went by almost 1.0% to 27.04%, from the previous week, whilst that of the 182-day T-bill stood at 28.50%, from 28.25% the past week.

The 364-day T-bill however went for ¢28.40%, lower than the 6-months bill.

As usual, investors were more interested in the three months bill as ¢954.66 million was secured. Indeed, government accepted all the bids submitted for the 91-day bill.

Despite, the yield on the six-month bill going up, bids submitted by the investors were estimated at ¢268.43 million, but government accepted ¢232 million.

The government however secured ¢114.65 million for the one-year bill.

Liquidity has improved on the domestic market in recent times, but that is coming at a cost because the government will pay more on borrowed funds.