The Government of Malawi has raised K249.8 billion from investors through auction of Treasury notes held on March 27, but authorities adopted a cautious approach due to rising yields.
A statement from the Reserve Bank of Malawi (RBM) indicates that despite strong demand, some bids were rejected.
The auction featured two-year, three-year, five-year and 10-year Treasury notes, with the seven-year note attracting no bids.
The statement further indicates that investors submitted applications totalling K468.05 billion, but the RBM allotted just over half that amount, suggesting that several offers were either priced too low or rejected to limit government borrowing costs.
Yields on all accepted notes were notably high, reflecting investor concerns about inflation and broader economic risks.
The two-year note cleared at a yield of 28.75 percent while three-year and five-year notes were priced at 30 percent and 32 percent, respectively.
The 10-year note offered the highest return at 35 percent and the rates exceeded their respective coupon payments, reinforcing signs of cautious optimism.
The pattern of results reveals a steep yield curve, a common indicator that investors expect higher inflation or economic volatility in the years ahead.
This trend could exert upward pressure on future government borrowing and complicate fiscal planning, according to money market analysts.
Participation varied across maturities with the 10-year note attracting the most interest, with seven bids submitted followed by three for the three-year note, two for the two-year note, and two for the five-year note. The total number of bids amounted to 14, with only a portion awarded.
Commenting on the trends, Scotland-based Malawian economist Velli Nyrongo noted that the recent patterns suggest a market willing to fund public borrowing, but only at premium yields.
“With interest rates under scrutiny and inflation risks looming, the Reserve Bank may face difficult choices in calibrating monetary policy,” he said.
Economics Association of Malawi president Bertha Bangara Chikadza expressed concern that the growing demand for Treasury notes coupled with the lack of alternatives and high yields could worsen the country’s public debt currently at about K16 trillion.
She said that lack of a robust secondary market for government securities impacts debt sustainability, liquidity management and the broader investment climate by crowding out the private sector.
Said Bangara Chikadza: “Limited liquidity discourages participation in primary auctions, making it harder for the government to raise funds efficiently.”
RBM data shows that the proportion of government debt held in Treasury notes has risen from 29.6 percent in 2015 to 79.1 percent in 2024.
