Interest in the Treasury bills among the local investors continue to soar as the government exceeded its T-bill issuance target yet again despite rife reports that government may be unable to meet its T-bills investment obligations.

This week in the money and secondary treasury bills market, market participants were bullish as bills with maturity of 91, 182, and 364 were oversubscribed, as the government raked in GH¢8.11 billion. This means that the government exceeded its GH¢7.36 billion target set for the month.

The 91-day, 182-day, and 364-day tenors cleared at 30.45 percent (+184 basis points, 31.57 percent (+163 basis points), and 31.55 percent (+202 basis points) as yields continued their uptrend throughout September 2022.

Further afield, due to the robust appetite in the primary market, secondary market performance was bearish as average benchmark equities declined in excess of 20 basis points week on week.

However, buying interest persisted on the mid-and long-ends of the curve as average yields exceeded the auction target of GH¢999.86 million by 10.48% in the T-bill auction last week when all bids were accepted. The weighted average yield of the 364-day bill was however 31.55 percent.

In the coming week, the Treasury is seeking to raise GH¢1.176 billion across the 91-day to 182-day bills. The expected amount raised will be used to refinance maturities worth GH¢1.092 billion.

Trading Activity on Bond Market Rises Significantly

On the bond market (secondary market), trading activity shot up to GH¢3.32 billion, representing an increase of 128.5 percent, with sell-side activity dominating trades. As a result, the yield curve widened by an average of 101 basis points.

Most trades occurred at the front to the belly of the yield curve, with 2022-2025 maturities accounting for 48.6 percent of total face traded while 49.7 percent of trades occurred along the 2026-2029 maturities.

Meanwhile, experts expect investors to maintain interest in the T-bills for re-pricing benefits in the primary market because it is unlikely that there would be a bond offer next week. As such, investors in the secondary market are likely to focus on trading at the front to the belly of the yield curve.

The bullish performance in the primary market came at back of reports that the government is facing difficulty refinancing options in repaying maturing T-bills.

According to the Weekly Fixed Income Update by Databank Research, a refinancing offer on October 3, 2022, may not get much traction due to the expected domestic debt restructuring.

Last week, Fitch Ratings downgraded Ghana’s Issuer Default Rating from ‘CCC’ to ‘CC’. It cited possible debt restructuring, high debt service, and constrained financing as reasons for the recent downgrade. This is expected to complicate the refinancing options of the Treasury, the report added.

Having this in mind, it could be that Ghanaians have absolute trust in the government to meet its domestic debt obligations and also, it is possible that the high T-bills rate is a bait for local investors.