T-Bill Yields Near Commercial Lending Rates Amid 243 Billion Birr Domestic Borrowing Plan

Ethiopia’s treasury bill yields have surged close to commercial lending rates, with the six-month tenor reaching 20.5 percent during the latest auction as the Ministry of Finance seeks to raise 243 billion Birr in domestic borrowing through December 2025.

The borrowing programme, covering seven auctions from October 1 to December 24, allocates 97.2 billion Birr to 182-day bills, 85.1 billion Birr to 91-day bills, 36.5 billion Birr to 364-day bills, and 24.3 billion Birr to 28-day bills.

The first auction under the schedule was held this week and attracted bids worth 47.5 billion Birr against an offer of 29.5 Billion birr. The Ministry accepted a total of 24.3 billion Birr, fully taking up its 28-day and 91-day targets, while only 62 percent of the 182-day offer was allotted. No 364-day bills were issued in this round.

Cut-off yields stood at 20.5 percent for 182-day bills, 14.9 percent for 91-day bills, and 12.5 percent for 28-day bills. Weighted average yields were 17.0 percent, 14.6 percent, and 12.3 percent respectively.

For comparison, commercial bank time deposit rates currently hover around 15 percent, while lending rates typically range from 20 to 21 percent.

“The increase in treasury bill yields above deposit rates makes government securities more attractive for banks and other investors, but it may also discourage private sector lending as funds are redirected to the safer option,” said one Addis Ababa-based business analyst.

Ethiopia’s treasury market has expanded sharply over the past two years. Sales rose 32 percent to 798 billion Birr in the 2023/24 fiscal year, while outstanding bills had reached 447.8 billion Birr by June 2024.

By June 2025, domestic public debt stood at 2.5 trillion Birr, with Treasury bills and bonds accounting for the majority.

The market has seen growing participation from both commercial banks and non-bank financial institutions, reflecting efforts by the Ministry of Finance and the National Bank of Ethiopia (NBE) to deepen domestic debt markets.

The July 2025 launch of the Ethiopian Securities Exchange introduced secondary trading of T-bills, providing a platform for price discovery and liquidity beyond primary auctions.

The government’s focus on short- and medium-term bills aligns with its strategy to manage rollover risk while meeting fiscal needs amid rising domestic debt. Market players note that 91-day and 182-day maturities account for nearly two-thirds of planned issuance in the October–December calendar. Shorter tenors are fully absorbed, while demand for six-month bills continues to exceed supply, contributing to higher yields.

Against prevailing monetary conditions, weighted average yields for accepted bills remain closely aligned with commercial lending rates, influencing banks’ portfolio allocations between government securities and private sector loans.

The Ministry of Finance continues to use the issuance calendar to signal predictable funding needs, balancing cost, liquidity, and investor participation.

Experts expect strong demand in upcoming auctions, although yields may remain elevated on the six-month tenor if investor appetite for longer-term paper remains limited.