Africa Markets Insider: Africa PMIs and Ghana Local Bonds

Economics: What you need to know

Africa PMIs: The average reading across Africa picked up slightly to 50.2 in February from 49.8 in January. Although the reading is marginally in expansionary territory, it is still down from its near-term high of 52.4 in October 2020, showing signs of moderate stress. With the continued rollout of covid-19 vaccines, we expect a gradual improvement in economic prospects and potentially a reverse to the downtrend in the months ahead. Countries like Cote d’Ivoire, Senegal, Mozambique, South Africa and Zimbabwe are making strides in vaccinating their populations, but more jabs are needed to reach the herd immunity levels that should entrench renewed economic vigour.

Financial markets: What you need to know

Ghana: In our note entitled Do GHGBs still have legs to run?, we noted that local bonds can rally when the central bank looks to lower the yield curve to reign in debt servicing costs. Yesterday, bookrunners for the upcoming 5-year local bond announced an initial price guidance of 17.8% to 18.4%, which was lower that what the market expected and positive for the rest of the curve. We estimate that yields could compress by over 100bp this year as the carry trade prospects continue to entice offshore investors.

Figure 1: Historical and forecast 6-year bond


Source: Source: RMB Markets, Bloomberg