The interest rates on short-term treasury bills fell marginally at the recent weekly auction of the Government of Ghana securities.
The Bank of Ghana, which manages the government’s borrowing programme auctioned both 91- Day bills and 182-Day bills at an average interest rate of 13.67 percent and 14 percent, down by approximately 0.37 percent and 0.02 percent from last week. However, investors bid at a lower average rate of 13.5 percent and 13.1 percent respectively.
In terms of discount rates, the government auctioned GH¢962.95 million in three-month bills dominating the treasury bill sales with an approximate average price of 13.23 percent with the lowest accepted price being 13 percent and the highest being 13.45 percent. This discount rate is lower than that of the immediate past auction where the average price lingered between 13.55 percent and 13.59 percent.
Likewise, for the six-month bills, GH¢122.19 million was auctioned at a discount rate extending from 13 percent to 13.17 percent per annum as against a range between 13 percent and 13.2 percent. Also, the discount rate reflects that the bills sell for less than face value.
Additionally, from the start of year 2021 Treasury bills sale have been oversubscribed, with government continually exceeding its target for five weeks running. For instance, the Central Bank received bids worth GH¢1679.41 million as against its target amount of GH¢856 million.
These figures further indicate investors’ interest in the short end of the market as purchase of government’s short term securities continue to soar with more preference for bills maturing within 91 days.
Analysts hold that this spike in investors’ interest could be as a result of the second wave of the coronavirus pandemic which is pushing investors to look for a safe haven in times of uncertainty, pushing them to purchase government bills which are less risky.
The government, on the other hand, will equally secure enough funds to repay maturing loans, finance its budget and cover its recorded budget deficits amid the heightened expenditures associated with the pandemic.
However, the Bank of Ghana rejected a whooping GH¢602.64 million worth of bids tendered for both the three-month bills and six-month bills. According to analysts, this could be as a result of some of bids coming in at a higher rate than what the government is willing to borrow at.
Highlighting on the upcoming auction of Government of Ghana securities to be held this week, the Bank of Ghana intimates a predicted weighted average discount rate and interest rate per annum of 13.36 percent and 13.82 percent respectively for the 91 Day bill, 13.09 percent and 14.01 percent for 182 Day bills correspondingly.
Analyst anticipate that there is the risk of a stronger than expected rise in inflation fuelled by unprecedented levels of monetary and fiscal stimulus, and the spike in demand once vaccines are widely distributed.
However, investors’ confidence seems boosted due to the vaccine optimism suggesting the economy seems to be picking up in the deepest global crises in a century
