Ethiopia closes its fiscal year with T-bill yields at multi-year lows and the one-year back in favour

An analysis of the 1,006th T-bill auction — the final of EFY 2018 (2025/26): yields hit multi-year lows and the one-year cleared at perfect cover.

The questions left open two weeks earlier were whether the government would keep leaning its supply toward the one-year and whether the long end's recovery would hold. The 1006th auction, the last of the fiscal year, answered both in the affirmative and went further. The government again tilted its offer to the 364-day, and the one-year did not merely clear: it cleared at perfect cover, every accepted bid landing at the lowest yield submitted. Across the curve, yields fell again, leaving the one-month bill at 7.078%, its lowest since December 2020.¹

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, and the terms of that rollover matter more than the headline size. Ethiopia ends EFY 2018 (2025/26) with that pattern firmly in place. With roughly ETB 85 billion of bills maturing over the coming 30 days, the closing auction of the year is best read as a rollover operation, not new borrowing.

Against that maturing wall the government again refinanced only a fraction through the auction. It accepted ETB 28.09 billion, the entire amount it offered, equal to about a third of the next 30 days of redemptions. ⓘThe ~ETB 85 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, by contrast, was overwhelming: bids reached ETB 96.76 billion, a bid-to-cover ratio of 3.44, with the offer held to ETB 28.09 billion against a calendar plan of ETB 42.79 billion.

Auction snapshot · June 24, 2026 (1006th auction)

The government accepted the full amount it offered at every tenor, so acceptance was 100% of the actual offer. Measured against the calendar, the auction was again smaller than planned: the ETB 28.09 billion offered was ETB 14.70 billion below the ETB 42.79 billion the Ministry of Finance had scheduled for June 24, a change from the auction plan that continued the supply restraint of the fourth quarter.

Offer composition: the one-year tilt, held

The June 24 offer kept the long-end lean of the prior auction. 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 calendar had again called for a six-month-heavy auction (40% at the 182-day, 30% at the 364-day); the government again inverted that, holding the one-year at the top of the stack and trimming the six-month.

That the government repeated the tilt, rather than reverting to plan, reads as confirmation of a deliberate effort to term out funding while the one-year is affordable. The one-year cut-off stood at 19.00% only six weeks earlier; at 14.719% it is now the lowest since May 2025, and a borrower that expects to keep refinancing has reason to lock in more of its debt at a rate it could not secure in mid-May. The reading is inferred from the supply mix rather than confirmed by the auction, but two auctions in a row at the same tilt make a one-off tactical move the less likely explanation.

The offer also ran well below the calendar in total, at 65.7% of the planned amount. An offer below plan points less to a cash shortfall than to a government meeting its needs from other sources, or judging that it need not roll the full maturing amount through the bill market this round. Paired with demand running at more than three times the paper available, the small offer also served to drive the clearing yield down, which is what happened.

Demand by tenor

Demand was strong across the curve and strongest in the middle. The 91-day drew the highest cover at 4.63, with ETB 32.51 billion of bids against ETB 7.02 billion offered. The 28-day followed at 3.73 cover and the 182-day at 3.59. The 364-day, carrying the largest share of the offer, drew the lowest cover at 2.39, yet that understates the shift: the one-year cleared at perfect cover, every accepted bid at the lowest yield submitted, a marked turn from mid-May, when it had been undersubscribed.

Two tenors thus closed the year at the floor. The 28-day and the 364-day both cleared at perfect cover, while the 91-day cleared within about two to three basis points of it. Only the 182-day carried a wider tail, its marginal accepted bid sitting further above the most aggressive one, the lone sign of dispersion in an otherwise tightly bid auction.

How yields changed from the previous auction

Compared with the previous auction held on June 10, 2026, cut-off yields fell again at every tenor, with the move concentrated at the short end.

The 28-day cut-off dropped from 8.53% to 7.08%, a fall of 145 basis points, taking the one-month bill to its lowest since December 2020. The 91-day eased from 9.86% to 9.02%, while the longer tenors moved little: the 182-day slipped from 12.46% to 12.39% and the one-year from 15.38% to 14.72%. Each tenor now sits at a multi-year low for its maturity, the 91-day since July 2024, the 182-day since October 2024, and the 364-day since May 2025, though 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 short end fell faster than the long, the curve steepened: the spread between the one-year and the one-month widened from 6.85 to 7.64 percentage points, a classic bull steepening in which falling yields lift the front of the curve most. The blended weighted-average yield across all tenors fell from 12.24% to 11.67%, the lowest of the year.

Six-auction runway: how the market got here

The 1006th 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 April 1 to June 10, 2026, trace an uninterrupted fall in the government's borrowing cost against demand that stayed oversubscribed throughout.

The six auctions before June 24 — plan, offer, demand, yields

The government's blended cost of new debt fell from 16.62% on April 1 to 11.83% at this auction, a decline of nearly five percentage points in under three months. Demand stayed above 1.7× cover at every auction in the window, and the offer did much of the work: from late May the government held its supply below the calendar plan and let an oversubscribed order book press yields lower. The one-year, which spiked to 19.00% on May 13 when inflation data turned, retraced over the following three auctions to close the year at 14.72% and full cover.

That arc is the fiscal year in miniature. Across EFY 2018 the government's weighted-average cost of new T-bill debt fell from the mid-16% range early in the year to 11.83% at its final auction, even as the market it borrowed from went from frequently undersubscribed to consistently oversubscribed.

What is driving these trends?

The decline in T-bill yields reflects an improving policy and external backdrop, carried into the fiscal year's close.

An external anchor. The International Monetary Fund (IMF) and Ethiopia reached a staff-level agreement on the Fifth Review of the country's Extended Credit Facility on June 3, 2026, a step that would unlock about US$468 million and that the Fund tied to easing inflationary pressure, rising foreign-exchange reserves, and improving exports.² Continued external financing eases the pressure on domestic borrowing and supports demand for government paper, which helps explain why the government could under-offer into the calendar and still clear at falling yields.

A tight policy rate and a stable currency. 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,³ sustaining the depth of demand on display in the year's closing auctions.

Inflation, still the long-end's constraint. The most recent published reading, for April 2026, put headline inflation at 11.7%, up from a multi-year low of 9.4% in March and driven by food prices.⁴ That backdrop is why the one-year, though now at perfect cover, eased far less than the short end: investors still ask for extra compensation to lend for a full year, and a thin secondary market for government securities, which makes a one-year bill hard to sell before maturity, adds a further premium at the long end.

What to watch in the next fiscal year

With EFY 2018 closed, attention turns to the first auction calendar of EFY 2019 (2026/27), which the Ministry of Finance has not yet published. The new fiscal year arrives with a larger budget behind it: the Council of Ministers approved a draft federal budget of ETB 2.339 trillion on June 9, 2026 and forwarded it to Parliament, about 21% above the current year, with more than 80% to be financed domestically.⁵ How heavily that leans on the bill market will show first in the size and shape of the new calendar.

Two signals will frame the opening auctions. The first is whether the government keeps under-offering against plan, which has driven yields down, or normalizes supply to refinance a maturing wall that has not shrunk. The second is the one-year: it has fallen for three auctions running and now clears at the floor, but the next inflation reading will decide whether it keeps easing toward the short end or steadies. The short end (the 28- and 91-day) is likely to stay heavily oversubscribed and near its lowest yields in 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 85 billion maturity estimate are own computations. This article explains and contextualizes the auction; it is not investment advice.

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