Mid Year Yield Shift: Treasury Bills Fall to 12%
Key Business Points
– Treasury bill yields have dropped up to 12 percentage points in just three months, making government borrowing cheaper and signaling tighter fiscal management.
– Banks are revising loan products to boost private sector borrowing as surplus government funds increase market liquidity.
– Finance leaders expect lending rates to decline as the gap between lending and borrowing rates narrows, improving access to affordable credit.
Treasury bill yields in Malawi have fallen sharply—by as much as 12 percentage points between December 2025 and March 2026—signaling a major shift in government borrowing costs. Auction results from the Reserve Bank of Malawi show the yield on the 91-day bill dropping from 16 percent to 12 percent, the 182-day bill from 20 percent to 15 percent, and the 364-day bill from 26 percent to 17 percent.
Treasury bills are short-term borrowing tools that let the government raise quick funds from banks and other investors to finance daily operations. A high yield means the government is paying a premium to borrowers—good for investors, costly for taxpayers. The recent steep decline means borrowing is getting far cheaper for Malawi’s treasury.
December’s auction raised K53.51 billion on bids worth K67.75 billion. By March, the total collected had fallen to K50.77 billion, despite applications rising to K82.09 billion. That reduced allotment is intentional, pointing to a deliberate cutback in public borrowing as interest payment concerns grow.
Financial Market Dealers Association President Leslie Fatch explains the change is linked to the government’s tightening appetite for debt, especially over fears about interest repayment costs. He adds that falling yields have pushed surplus liquidity into the banking system, prompting lenders to redesign loan products for private businesses and individuals.
“Expectations are that lending rates will begin to ease. Spreads between the cost of funds and loan rates should start narrowing,” notes Bankers Association of Malawi President Phillip Madinga.
In the recently unveiled 2026-27 National Budget, Finance Minister Joseph Mwanamvekha promised to pare the fiscal deficit from 11.9 percent to 9.0 percent of GDP. To achieve this, the government plans to boost revenue collection, cut borrowing, and restructure public debt to free up more fiscal space.
The steep drop in treasury bill yields is a signal that the government’s cost of money is falling, banks have more funds to lend, and credit—central for business growth—should become more accessible. Whether this leads to lower loan rates for entrepreneurs and households depends on how quickly banks pass through the liquidity gains to the broader economy. For now, the trend is moving toward cheaper borrowing and greater market optimism.
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