ghanaportfolio insightsRates

28 September 2020

Time to play checkers not chess

In brief

  • The dollar’s extended weakness in the last couple of months has begun to threaten its status as a global reserve currency.
  • The cedi held its own and remained range bound depreciating by approximately 0.1% and consequently offsetting panic sale reactions by foreign investors on the domestic bond market.
  • According to the finance minister, Ghana’s fiscal deficit is expected to approach 11.1% for 2020 and this underscores our concerns about how well Ghana can keep its head above water amidst the cedi’s relative stability.
  • We are thus overweight shorter duration papers as there will be some harder choices to make on how to “allocate” the accumulated costs of policy response.
  • Ghana Eurobonds have rallied since the beginning of June albeit not as sharply as during mid-April’s slump in crude prices when WTI1 futures, for the first time ever, traded in negative territory.
  • Overall, we are risk-off and prefer to crystallise gains on some of our positions amid significant divergence between fiscal reality and market