Addis Ababa, Ethiopia – July 20, 2025 Yields on Ethiopia’s Treasury bills have continued their upward trajectory, with recent auctions posting average returns of 17.6% for 364-day notes offering positive real returns for the first time since early 2023. The move reflects the National Bank of Ethiopia’s continued effort to align market interest rates with inflationary trends and restore monetary discipline.
The July 17 auction attracted bids exceeding ETB 15 billion, with strong participation from commercial banks, pension funds, and private investors seeking to hedge against persistent inflation and liquidity volatility. Demand has remained broad-based across maturities, but longer tenors have seen a notable uptick in investor appetite.
Real Returns Emerge Amid Disinflation With Ethiopia’s headline inflation easing to 23.7% in June, the 364-day T-bill yield now delivers a positive real rate for the first time in over a year signaling a reversal from the era of deeply negative real returns that discouraged institutional participation.
Shorter-term tenors have also climbed, with 91-day bills yielding 15.2%, up from 12.8% a quarter ago. The steepening curve suggests investors are beginning to price in higher term premia, despite inflation cooling from its 2024 highs.
NBE Reinforces Auction Credibility Under Governor Mamo Mihretu, the central bank has emphasized auction transparency and price-based allocation mechanisms—rejecting underpriced bids and signaling tighter liquidity management. The average bid-to-cover ratio now stands at 1.9x, up from 1.3x earlier this year, reflecting growing trust in the process.
Commercial Banks Rebalance Liquidity Banks have emerged as dominant bidders, seeking risk-free returns amid slower credit growth and tighter reserve requirements. Analysts note that the T-bill market is becoming a key policy channel for absorbing excess liquidity while providing banks with safer short-term instruments.
Next Phase: Deeper Secondary Market While primary auctions have gained momentum, secondary trading of T-bills remains thin, with minimal price discovery or interbank activity. The launch of the Ethiopian Securities Exchange’s fixed-income platform is expected to address this gap and foster real-time valuation.
Outlook: Gradual Normalization Monetary authorities are expected to maintain a moderately tight stance through Q3, allowing real yields to stabilize further. The main risk to T-bill performance remains FX market volatility and potential inflationary spillovers from fiscal expansion.
Market Insight: Ethiopia’s T-bill market is showing signs of maturity, with real yields returning and institutional demand strengthening. If sustained, the trend could enhance monetary policy transmission and deepen domestic capital markets.