Treasury bill yields have dropped sharply up to 12 percent between December 2025 and March 2026, auction results released by the Reserve Bank of Malawi (RBM) show.
Treasury bills are short-term borrowing instruments through which the government raises money from banks and other investors to finance its day-to-day operations.
The yield on a Treasury bill is the rate of return an investor earns by holding the instrument to maturity.
When yields are high, it means the government is paying more to borrow money, which is expensive for the taxpayer but attractive to investors.
When yields fall, borrowing becomes cheaper for the government, but investors earn less.
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During the auction held on 23 December 2025, the 91-day Treasury bill yielded 16 percent, the 182-day bill yielded 20 percent and the 364-day bill yielded 26 percent.
However, the auction held on 17 March 2026, those yields had fallen dramatically such that the 91-day bill now yields 12 percent, the 182-day bill yields 15 percent and the 364-day bill yields 17 percent.
Across all tenors, that represents a decline of between four and nine percentage points in just less than three months.
The total amount raised also shifted.
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In December, the Reserve Bank raised K53.51 billion against applications of K67.75 billion whereas in March, K50.77 billion was raised against applications of K82.09 billion.
This suggests that while investor appetite for the instruments remains strong, the government is choosing to allot less — a deliberate signal of reduced borrowing.
Financial Market Dealers Association President Leslie Fatch said the decline in yields was being driven by the government’s reduced appetite for borrowing, particularly as concerns mounted about the cost of interest repayments on public debt.
He said the falling yields had triggered increased liquidity in the banking system, prompting banks to revise their loan products to attract more private sector and individual borrowers.
“The drop is driven by the government’s appetite for borrowing, especially with sentiments that the government is bleeding on interest repayments. This also aligns with the intended policy rate reduction and government’s preference for an expansionary monetary policy to support private sector growth.
“This has led to increased levels of liquidity in the market, with notable initiatives by banks revising their loan product offerings to private sector and individuals to encourage more borrowing,” Fatch said.
Bankers Association of Malawi President Phillip Madinga said interest rate spreads remained a concern but expressed confidence that they would correct themselves as treasury bill yields continued to fall.
“The expectation is that the lending rates will come down. The gap in terms of spreads will begin to reduce,” Madinga said.
Presenting the 2026- 27 National Budget, Finance Minister Joseph Mwanamvekha said the administration was committed to reducing the fiscal deficit from 11.9 percent to 9.0 percent of GDP and would pursue debt restructuring to create additional fiscal space.
He said revenue mobilisation would be strengthened while government borrowing and debt stock would be reduced.
