ghanaportfolio insightsTreasury Securities

27 January 2022

The real test lies ahead

In brief

  • Mixed economic releases in the last few weeks have prompted a reassessment of the bubble of growth optimism that characterised markets and drove asset prices higher in the first half of the year.
  • Some key emerging markets are contending with rising inflation and have begun hiking rates in an attempt to avert a potential crisis
  • In Ghana, while inflation expectations seemed highly correlated with yields in developed markets, yields on our local sovereign bonds declined further by 87bps in 2Q2021 on the back of a favourable cedi outlook and massive central bank liquidity
  • The local currency has felt the heat of mounting pressures from higher corporate demand and thin market liquidity despite active supply management from the central bank
  • We picked up some bargains across the belt and long-end of the curve to enhance our portfolio’s yield and carry as investors dialed back on the duration
  • As liquidity continues to drive yields at their current levels, we will continue to develop a much deeper understanding of how and when the tide can change so we are in the best position to tweak, readjust and rebalance our positions in order to capture the most value on the curve