Government has missed its target at an auction of Treasury bill for the third time running to close the year 2020, signaling investors may have demanded higher yields amid a cash crunch during the coronavirus pandemic.
The Bank of Ghana, which manages the government’s borrowing programme accepted all bids for the 91/182/364-Day bills which aimed to raise GH¢852 million, however, bids were undersubscribed causing the government to fall short of its target amount by 13.24 percent, losing GH¢112.82 million sales for the week.
Similarly, at the immediate past two treasury sales, government lost sales worth GH¢827.25 million and GH¢109.26 million respectively depicting a short fall of its target by approximately 46 percent and 10.81 percent correspondingly, even though interest rates continue to remain fairly stable.
Detailing the money market auction made, the government auctioned GH¢510.10 million in three-month bills dominating the treasury sales at a discount rate ranging from 13.6 percent to 13.65 percent; Another GH¢112.34 million in six-month bills auctioned at a discount rate extending from 13.2 percent to 13.25 percent per annum.
Although, the 364-day bill which was introduced by the government to replace the 1-year note had the highest discount rate ranging from approximately 14.02 percent to 14.6 percent, it made sales totaling GH¢116.74 million, showing investors preference for the 91-Day bill.
The Bank of Ghana further asserted that the range of rates have remained fairly stable with the bid rates and the discount rates lingering around the same average but are lower than the interest rates. The interest rates for the 91-Day bill reached from 14.08 to 14.13 percent per annum. The 182 Day Bill also shows a similar but a marginally higher interest rate than the 91- Day bill, extending from approximately 14.13 to 14.19 percent per annum, while the 364-Day bill recorded the highest interest rate ranging from 16.3 to 17.1 percent per annum.
The Bank of Ghana is projecting that government will need to borrow GH¢987 million at the start of the new year, 2021 as government boosts the sale of treasury securities to cover record budget deficits suffered due to the coronavirus pandemic.
Highlighting on the upcoming auction of Government of Ghana securities to be held on Monday, 4th January, the Bank of Ghana intimates a predicted weighted average discount rate and interest rate per annum of 13.62 percent and 14.1 percent respectively for the 91 Day bill, 13.2 percent and 14.15 percent for 182 Day bills correspondingly, for the period starting from, 4th – 8thJanuary 2021.
With the introduction of the recent guidelines to having a well-structured and well-functioning money market aimed at strengthening the primary dealership system, this will help in facilitating the development of the fixed income market and at the same time, creating a stable environment for the Government Securities market in which private sector investors could readily meet their investment needs.
“Only financial institutions authorised by the [Bank of Ghana] shall be eligible to participate in the wholesale auction as Primary Dealers.
“Interested investors can buy or sell securities in the secondary market through accredited depository participants”.
