Government continues to reject T-bills bids

The Malawi Government continues to reject Treasury bill (T-bills) bids, reinforcing its commitment to rein in domestic debt and a deeper shift in the country’s interest rate cycle, analysts have said. Results of the auction for the week ending February 20 show that the government only raised K113.48 billion out of K245.27 billion total applications, resulting in a 46.27 percent rejection rate. The bulk of longer-dated bids were rejected and the one-year 364-day tenor for which K118.25 billion was offered at 18 percent from the previous week’s 26 percent received no allotment.

The six-month 182-day tenor was partially accepted at 16 percent, a drop from 20 percent while the 91-day tenor was fully allotted at 12 percent, a marked drop from the 15 percent the previous weeks. Since the start of the year, government has rejected T-bills bids worth more than K540 billion using auction discipline to push yields lower and contain interest costs on domestic debt estimated at K14 trillion, about 65 percent of total public debt stoc of K22 trillion. Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha said in an interview on Thursday that the rejection is deliberate to cut interest rates, reduce domestic borrowing and encourage banks to expand private sector lending.

“If we reduce borrowing, we will be reducing our debt burden, reduce interest payment and guarantee increased private sector credit, which could spur economic growth,” he said. The auction outcomes, analysts argue are not isolated adjustments, but part of a broader recalibration. Stock market investor and former bank executive Benedicto Nkhoma said in an interview the latest results confirm that the shift is deliberate rather than reactive.

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“This is not panic borrowing. This is liquidity management,” he said, observing that the government is accepting short-term money at lower yields while rejecting long-term expensive borrowing and allowing rates to gradually normalise downward. Nkhoma argued that the complete rejection of the 364-day tenor signals unwillingness to lock in funding at previously elevated rates, adding that short-term yields will likely peaked if liquidity conditions remain supportive.

For investors, he warned that the window for high T-bills returns is closing slowly and that asset allocation decisions now matter more than ever. The effects are beginning to filter into the banking system. This month, commercial banks have cut their reference rates by 50 basis points to 24.70 percent following a 10 basis points reduction in January. The adjustment reflects easing cost-of-funds pressures as Treasury yields decline, according to analysts.

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