Yields on Sierra Leone’s treasury bills rose sharply on Monday as strong investor appetite for government debt coincided with persistent fiscal pressures, highlighting the high cost of public borrowing in the West African country.
The Bank of Sierra Leone said it issued NLe425 million in 364-day treasury bills against total bids of NLe548 million, representing a coverage rate of 78 percent. The bills were sold at an annualised yield of 17.1 percent, up from 14.8 percent in mid-2025, reflecting continued inflationary pressures and the premium investors demand for holding leone-denominated debt.
The auction, overseen by the central bank’s Money Market Division, saw bills cleared at a discount rate of 85.30, with some bids as high as 86.00. Authorities opted to issue less than the total amount bid, signalling robust demand while moderating immediate borrowing costs.
Analysts said the partial allotment approach allows the government to raise funds while managing yields, but sustained high rates carry broader economic implications. “Elevated treasury yields may crowd out private sector credit, as banks and institutional investors prefer the relative safety of government instruments over lending to businesses,” one Freetown-based economist said.
The auction forms part of an ongoing issuance pipeline, which includes NLe228 million in 364-day bills maturing in January 2027 and NLe63 million in two-year bonds due 2028. Treasury bills are accessible to the public via commercial banks, with minimum subscriptions starting at NLe500, subject to a potential 10% adjustment.
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Investor interest in these high-yielding instruments points to a dual narrative. On one hand, demand reflects a search for safe-haven assets amid economic uncertainty. On the other, the high yields embed significant risk premiums, signalling market concerns about inflation and fiscal sustainability.
“The market is signalling that while confidence in the government’s ability to repay remains intact, investors require compensation for elevated economic and fiscal risks,” said an analyst with a regional investment firm.
The central bank’s cautious issuance strategy illustrates the delicate balance between meeting immediate financing needs and managing long-term borrowing costs. Persistent high yields increase the debt servicing burden and constrain fiscal flexibility, particularly if inflation remains elevated or global financial conditions tighten.
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Sierra Leone’s public debt has been under pressure in recent years, as the government has sought to finance infrastructure projects, social programmes, and recurring budget gaps. Auctions like Monday’s reflect the ongoing need to tap domestic savings to fund state expenditure.
While investors continue to participate actively in the T-bill market, the cost of financing remains a critical concern. Analysts warn that if yields persist at elevated levels, the government may face higher interest obligations, potentially crowding out development spending or necessitating adjustments in fiscal policy.
The results of this and future auctions will be closely watched by market participants as indicators of investor confidence, inflation expectations, and the overall health of Sierra Leone’s domestic debt market. For fiscal authorities, balancing the urgency of raising funds against the long-term cost of borrowing will remain a central challenge in 2026.
Monday’s 17.1 percent yield underscores the broader tension facing emerging market governments: maintaining investor interest while managing the economic and social implications of high-cost borrowing in an environment of persistent inflation and constrained fiscal space.
