Ethiopia restores T-bill supply and leans into the one-year as yields keep falling

An analysis of the 1,005th T-bill auction — the government roughly doubled its offer, tilted supply to the one-year, and still cut its cost.

The previous auction left two open questions: whether the government would keep starving the market of paper after selling just over a third of its plan on May 28, and whether the one-year bill's recovery would hold once supply came back. The 1005th auction answered both. The government roughly doubled its offer to ETB 32.94 billion, close to the ETB 37.49 billion the calendar planned, and it pointed the extra supply at the long end. The one-year took the largest share of any tenor and still cleared with demand to spare, while yields fell again across the curve.¹

Within the framework of consistent T-bill operations, governments use the primary market less to raise net new money than to refinance debt that is constantly falling due. The terms on which that rollover happens matter more than the headline size. Ethiopia's market carries a large stock of short-dated bills, and with roughly ETB 92 billion maturing over the coming 30 days, the 1005th auction is best read as a rollover operation, not new borrowing.

Against that wall, the government refinanced more than it had two weeks earlier but still less than the full amount coming due. It accepted ETB 32.94 billion, the entire amount offered, equivalent to about 36% of the next 30 days of maturities, up from 18% on May 28. ⓘThe ~ETB 92 billion maturing figure and the share-of-wall refinanced are our own computations from accepted-amount history; the government's actual near-term redemption profile may differ due to settlement timing, supplementary auctions, or funding raised outside the T-bill market. Demand stayed comfortably ahead of supply: bids reached ETB 68.22 billion, a bid-to-cover ratio of 2.07. That is softer than the 3.49 of May 28, as expected when the offer nearly doubles, but it still left every tenor oversubscribed.

Auction snapshot · June 10, 2026 (1005th auction)

The government accepted the full amount it offered at every tenor, so acceptance was 100% of the actual offer. The total offer came in ETB 4.55 billion under the ETB 37.49 billion calendar plan, a modest shortfall after May 28's deep cut, but the composition diverged more than the total: the government sold more one-year and three-month paper than planned and less six-month, a change from the auction plan worth reading closely.

Offer composition: tilting toward the one-year

The June 10 offer reweighted the curve toward its long end. The 364-day made up 35.0% of the amount offered, the 182-day (six-month) 30.0%, the 91-day 25.0%, and the 28-day 10.0%. The plan had called for a six-month-heavy auction (40% at the 182-day, 30% at the 364-day); the government inverted that, lifting the one-year share to the top of the stack and trimming the six-month.

That tilt appears as a decision to term out funding while long money is cheaper than it was. The one-year cut-off had stood at 19.00% only a month earlier; at 15.38% it is now the most affordable it has been since the August 2025 turn, and a government that expects to keep refinancing has reason to lock in more of its borrowing at a rate it could not get in May. Concentrating fresh supply at the 364-day also lengthens the maturity profile, pushing repayments further out rather than bunching them into the near term. The reading is inferred from the supply mix, not confirmed by the auction, but it is consistent with a borrower growing more comfortable at the long end.

By tenor, the offer ran above plan at the 91-day (ETB 8.23 billion against a planned ETB 7.50 billion) and the 364-day (ETB 11.53 billion against ETB 11.25 billion), and below plan at the 182-day (ETB 9.88 billion against ETB 15.00 billion) and the 28-day. An offer below plan at the short and middle tenors, paired with an above-plan long end, points less to a cash shortfall than to a deliberate reshaping of the maturity profile.

Demand by tenor

Demand was even across the curve in cover terms, and the notable feature was where it was tightest. The 91-day drew the strongest cover at 2.31 (ETB 19.02 billion of bids against ETB 8.23 billion offered), with the 28-day at 2.16 and the 182-day at 2.17. The 364-day, carrying the largest offer, drew the lowest cover at 1.79 (ETB 20.67 billion of bids against ETB 11.53 billion offered), yet that is a marked improvement on the one-year's recent run, when it was undersubscribed as recently as May 13.

Two tenors cleared at exactly the lowest yield bidders submitted, a "perfect-cover" reading in which every accepted bid came in at the floor: the 28-day and, more tellingly, the 182-day. A perfect cover at the six-month, even as the government sold nearly ETB 10 billion of it, signals that appetite for medium-dated paper is deep enough to absorb sizable supply without the yield drifting up to clear. The one-year, by contrast, carried a wider tail, meaning the marginal accepted bid sat further above the most aggressive one, the usual sign that long-dated demand, while recovered, is still the thinnest part of the book.

How yields changed from the previous auction

Compared with the previous auction held on May 28, 2026, cut-off yields fell again at every tenor, though by less than the outsized moves of the prior fortnight.

The short and middle tenors led the decline. The 28-day cut-off fell from 9.50% to 8.53%, the 91-day from 10.81% to 9.86%, and the 182-day from 13.37% to 12.46%, each a drop of roughly 90 to 100 basis points. The one-year eased far less, from 15.65% to 15.38%, a move of 27 basis points, having already retraced most of the May 13 spike at the previous auction. The 28-day, 91-day, and 182-day cut-offs are each at their lowest in more than a year (the 28-day since March 2024, the 182-day since October 2024), while the one-year is at its lowest since the August 2025 turn. All remain well above the near-zero yields of the pre-reform era, when rates were administered rather than set at auction and so are not a fair comparison.

Because the one-year fell less than the one-month, the curve steepened slightly: the spread between the 364-day and the 28-day widened from 6.15 to 6.85 percentage points. The blended weighted-average yield across all tenors fell from 12.48% to 12.24%, a decline the May 13 one-year spike never interrupted. That the government's cost kept falling even as the offer nearly doubled is the clearest sign that lower yields are being driven by genuine demand, not merely by withheld supply.

Six-auction runway: how the market got here

The 1005th auction's outcomes are the culmination of the previous auctions and their result trends. The six auctions that preceded it, ⓘThe six-auction window is chosen as a pragmatic span that captures near-term market movements; it is not a statistically derived lookback. from March 18 to May 28, 2026, trace a steady decline in the government's borrowing cost alongside firm, and at times intense, demand.

The six auctions before June 10 — plan, offer, demand, yields

The blended cost of new debt fell from 16.29% on March 18 to 12.44% at this auction, a decline of nearly four percentage points in under three months. Demand firmed from April 1 and has stayed above 1.7× cover at every auction since, with the May 28 spike to 3.49× reflecting a deliberately shrunken offer rather than a surge in bidding. The one-year sits at the center of the story: its cut-off held near 16.4% through March and April, spiked to 19.00% on May 13 when inflation data turned, then fell back to 15.65% and 15.38% as the spike proved temporary.

The June 10 result confirms that the easing has outlasted the supply squeeze. Where May 28 drove yields down on a third of the planned offer, June 10 drove them down further on nearly double the volume. The government has shown it can both ration supply to cut its cost and meet the calendar without giving the gains back.

What is driving these trends?

The decline in T-bill yields reflects an improving external and policy backdrop, set against an inflation print that has yet to confirm the trend.

An external vote of confidence. On June 3, 2026, the International Monetary Fund (IMF) and Ethiopia reached a staff-level agreement on the Fifth Review of the country's Extended Credit Facility, a step that would unlock about US$468 million and bring total disbursements under the four-year program to roughly US$2.65 billion. The Fund cited easing inflationary pressure, a build-up of foreign-exchange reserves, and improving exports.² An agreement of this kind, reached a week before the auction, supports demand for government paper by signaling that the reform program remains on track and that external financing continues to flow, easing the pressure on domestic borrowing.

A stable currency and a tight policy rate. The birr traded near 158.8 per US dollar on June 9, broadly steady into the auction under the managed float adopted with the July 2024 foreign-exchange liberalization.³ The National Bank of Ethiopia (NBE) has held its benchmark policy rate at 15% since adopting an interest-rate-based monetary framework in August 2024, and the July 2025 end of mandatory bank purchases of government bonds has freed bank balance sheets to absorb more T-bills,⁴ sustaining the depth of demand on display here.

Inflation, the unresolved variable. The most recent print available at the auction showed headline inflation at 11.7% in April 2026, up from a multi-year low of 9.4% in March and driven by food prices.⁵ That uptick is the main reason the one-year did not fall as far as the shorter tenors: investors still want extra compensation to lend for a full year until the price trend is clearer. A thin secondary market for government securities, which makes a one-year bill hard to sell before maturity, adds a further illiquidity premium at the long end.

What to watch in the next auction

The next auction is scheduled for June 24, 2026 under the Ministry of Finance's Q4 EFY 2018 calendar,⁶ the final auction of the current quarter, with a planned offer of about ETB 42.8 billion weighted back toward the six-month tenor. The first signal to watch is whether the government holds its one-year tilt or reverts to the calendar's six-month emphasis. A repeat of the June 10 long-end lean would confirm a deliberate effort to term out funding while the one-year is cheap; a return to the six-month would suggest May 28 and June 10 were tactical rather than a new strategy.

The second is the one-year cut-off itself. It has eased for two auctions running but remains the curve's stickiest point, and the next inflation reading will likely decide its direction: a softer print would let it fall toward the shorter tenors, while another food-driven rise could halt or reverse the move. The short end (the 28- and 91-day) is likely to stay comfortably oversubscribed and near its lowest yields in more than two years. The NBE's next policy-rate decision and the next inflation movement will frame how the central bank balances inflation control against the government's borrowing needs.

Offer-composition shares, the planned-versus-actual gaps, and the ~ETB 92 billion maturity estimate are own computations. This article explains and contextualizes the auction; it is not investment advice.

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