Macro Analysis /

US swap traders now favour a 25bps hike this month

  • Inflation in Mozambique continued to quicken in February despite a resilient metical

  • Swap traders revert to a 25bps rate hike as the most likely outcome of the March FOMC meeting

  • Fitch sees the Republic of Congo posting fiscal surpluses in 2023 and 2024

Takudzwa Ndawona
Takudzwa Ndawona

Financial Markets Analyst

Kieran Siney
Kieran Siney

Head of African Markets

ETM Analytics
13 March 2023
Published byETM Analytics

Talking points:


The financial markets will start the week unpacking the collapse of Silicon Valley Bank in the United States. The bank was shuttered by the Federal Deposit Insurance Corporation on Friday representing the biggest banking failure since the Great Financial Crisis of 2008. Silicon Valley Bank was attempting to assure customers as late as Thursday that fears were unwarranted. Wednesday started the fallout when the bank announced that it would be raising $500m from the venture capital firm General Atlantic while at the same time offloading assets worth in the region of $21bn at a loss of $1.8bn.


Botswana: President Mokgweetsi Masisi has indicated that Botswana will drop its demand to sell a bigger share of the diamonds produced by its joint venture with De Beers, raising the stakes in talks to renew a sales deal that expires in June. Masisi told reporters that Botswana had denied itself the opportunity to sell its diamonds through the 54-year-old joint venture agreement. He added that the experience of selling diamonds outside the De Beers system, which sells unpolished, or rough, stones, had shown that Botswana could get more revenue. Last month, Masisi threatened to walk away from talks to renew the sales deal unless Botswana gets a larger share of output from the joint venture. He did not specify the size of the share it sought. Meanwhile, De Beers CEO Al Cook, who met President Masisi on Friday, said that he had a "constructive discussion" with the president. According to Cook, "it is very clear that, front and foremost in the president's mind is the interest of the Botswana people. We, as De Beers want to play our role in a strong, strategic partnership. I'm very confident that this partnership will go forward in a very good way."

Egypt: As part of measures to advance with the economic reform program and raise much-needed foreign currency, Egypt will begin the process of offering two military-affiliated companies to investors on March 15 and is also planning to put forward another four large companies. According to a cabinet statement, advisers will provide investors with the necessary information about fuel distributor Wataniya and water bottler Safi. A committee that’s responsible for listing state-run firms will also offer four “large” companies to investors through inter-national investment banks, it said without naming the companies.

Ghana: The Credit Derivatives Determinations Committee ruled that there won't be an auction to settle credit default swaps tied to Ghana's debt. According to a statement by the panel, the criteria related to the number of transactions and dealers involved in the instruments was not satisfied. The swaps will be settled via physical settlement. Note that Ghana's missed interest payment this month has sparked default coverage payout.

Kenya: President William Ruto has appointed Susan Koech as the second deputy governor of the central bank. The post had been unoccupied for more than five years after Ruto's predecessor failed to fill it when its previous occupant left. The bank has been led by Governor Patrick Njoroge and one deputy, Sheila M'mbijiwe. Njoroge's and M'mbijiwe's terms are to end in June, meaning Koech could serve as acting governor if their replacements are not appointed by then. During her confirmation hearings, Koech cast herself as a dove when she called for looser monetary policy to help lower the cost of living in Kenya. She also urged lawmakers to review Kenya's interest-rate regime and propose legislative and policy interventions to enable Kenyans to access credit at more affordable rates. Koech has also called for a more vibrant interbank market to encourage the free flow of foreign currency amid a shortage of dollars in Kenya.

Nigeria: To expand digital payments usage and boost lending, Nigeria's central bank has asked lenders to adopt a common standard to share authorized customer data with third-party firms, including financial technology and e-commerce companies. According to CBN, the new rules will ensure "efficiency, competition, and access to financial services." The government has long sought to broaden financial inclusion since 2012, but progress has been slow. Authorities have only in recent years pushed for banks and mobile money companies to share resources in a country where almost 40% of adults lack any form of a bank account.

Rwanda: Urban inflation in Rwanda edged higher to 20.8% y/y in February from 20.7% y/y in January. A report from the National Institute of Rwanda showed food and non-alcoholic beverages increased by 42.4% on an annual basis and increased by 4.7% on a monthly basis. Housing, water, electricity, gas, and other fuels increased by 7.1% on an annual basis and increased by 0.9% on a monthly basis. Mean-while, transport increased by 12.1% on an annual basis and decreased by 0.1% on a monthly basis. Overall, Rwanda's inflation remains significantly elevated and in double-digit territory. This suggests that Rwanda's central bank is likely to maintain its hawkish approach to monetary policy for the foreseeable future.

Forex: Inflation in Mozambique continued to quicken in February despite the resilience in the metical 

Consumer price inflation in Mozambique rose to 10.30% y/y in February from a nine-month low of 9.78% y/y in January. On a month-month basis, prices rose 0.97% during the month. Rises in the price of food and non-alcoholic beverages, transportation, and education underpinned the acceleration in the headline reading.  


Fixed Income: Swap traders revert to a 25bps rate hike as the most likely outcome of the March FOMC meeting       

To say that Friday was a wild day for bond markets is an understatement. Notwithstanding the stronger-than-expected US nonfarm payroll number, shorter-dated US Treasury yields continued to slump on Friday, adding to the move that started on Thursday fueled by concerns over the US banking sector amid the Silicon Valley Bank crisis.

Macroeconomic: Fitch sees the Republic of Congo posting fiscal surpluses in 2023 and 2024

There was some action on the Africa sovereign credit rating front over the weekend. Fitch published a sovereign credit rating update for Congo late on Friday evening. The agency affirmed the Republic of Congo’s long-term foreign-currency rating at CCC+. Note that Fitch doesn’t assign outlooks to sovereigns with a rating of CCC+ or below. Fitch said in its statement that Congo’s CCC+ rating reflects high government debt, weak governance indicators, high oil dependence and weak management of public finances with a recent history of defaults.