The government’s auction of Treasury bills for the second-time running has been oversubscribed, signaling investors’ interest in the short end of the market with the purchase of securities maturing in less than one year.
The GH¢756 million issue of Government Treasury bills got oversubscribed by 30.8 percent, amounting to approximately GH¢989 million with the government gaining a whopping GH¢233 million extra which is higher compared to the immediate past auction’s additional sale of GH¢86.5 million.
The Bank of Ghana, which supervises the borrowing programme on behalf of the government accepted all bids for the bills, carrying a maturity of 91 days and 182 days.
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 Bank of Ghana asserted.
The weighted average interest rate hovered around 14.11percent for the 91-Day bill increasing by 2 basis points (0.02%) compared to 14.09 percent for the previous treasury sale. For the 182 Day-bill, it remains marginally higher than the 91- Day bill interest rate lingering at 14.16 percent which is same as last time’s auctions.
Again, with level of investment geared towards shorter term securities, the three-month bills was highly patronized by investors at the treasury bill sales, as the government auctioned GH¢864.67 million at an approximate average price of 13.63 percent with the lowest accepted price being 13.6 percent and the highest being 13.65 percent.
The six-month bills, on the other hand had a total of GH¢124.21 million auctioned at a discount rate extending from 13.20 percent to 13.25 percent per annum, emphasizing investors preference for the 91-Day bills.
Highlighting on the upcoming auction of Government of Ghana securities to be held on this week, the Bank of Ghana intimates a predicted weighted average discount rate and interest rate per annum of 13.61 percent and 14.09 percent respectively for the 91 Day bill, 13.21 percent and 14.14 percent for 182 Day bills correspondingly, as it plans to borrow GH¢1.24 billion for the week ending 15th January 2021.
The first few weeks of the year 2021 has indeed shown an improvement in the Ghana Financial markerts as Investors’ confidence boost despite the economic devastation wrought by the coronavirus pandemic, suggesting that the economy seems to be picking up in the deepest global crises in a century.
To create a stable environment for the Government Securities market, guidelines have been introduced to strengthen the primary dealership system, promoting a well-structured and well-functioning money market. This is to enable private sector investors to readily meet their investment needs, however, there are fears that the government might outcompete the private sector, as it continues to borrow domestically.
With sudden inflationary pressures experienced, shooting inflation up from 9.8 percent to 10.4 percent to close the year 2020, it is expedient that the government remains cautious as it continues to borrow to avoid crowding out the private sector.
According to the guidelines for government securities market, “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”.
