The secondary bond market for Government of Ghana papers experienced a significant slowdown, with trading activity declining by 43.6% to GH¢1.21 billion.

This decrease can be attributed, in part, to a shorter trading week resulting from the recent festive season.

Investors engaged in the exchange of bonds worth GH¢1.21 billion, marking a substantial 43.6% reduction in trading volumes. While the total volume traded was distributed across various tenors, the February 2028 (Coupon: 8.5%) paper stood out, dominating trading activity with 37% of the total market turnover.

Yields at the front end of the local currency (LCY) curve exhibited a downward trend, experiencing an average decline of 139 basis points to reach 17.5%. In contrast, the tail of the curve saw an advancement to 16.2%, reflecting an increase of 107 basis points.

Despite the slowdown, analysts anticipate a positive outlook for bond market activity in the coming month. The year-open portfolio adjustment by fund managers is expected to play a crucial role in revitalizing market dynamics. This adjustment is likely to stimulate increased participation and trading, injecting momentum into the bond market.

As the market grapples with the aftermath of the festive season, the focus on the February 2028 (Coupon: 8.5%) paper suggests specific preferences among investors. Understanding these patterns can provide valuable insights into the dynamics influencing trading decisions.

It’s essential to note that the observed decline in bond market turnover is not solely a reflection of reduced investor interest. External factors, including the festive season and associated holidays, inherently contribute to a subdued trading environment.

As market participants resume normal activities after the holidays, there’s a potential for increased momentum and renewed vigor in bond market transactions.

Analysts emphasize the importance of monitoring economic indicators, policy shifts, and global market dynamics to gain a comprehensive understanding of the evolving landscape, which will play a pivotal role in shaping the bond market’s trajectory in the near future.

Government Boosts Treasury Bills Borrowing

Meanwhile, in its latest bills issued in December 2023, the government of Ghana significantly ramped up its Treasury bills borrowing, securing GH¢16.34 billion, marking a 6.62% increase compared to the preceding month of November.

This substantial borrowing was primarily intended to refinance maturing bills amounting to GH¢12.83 billion, with the excess funds utilized to cover other essential budgetary needs.

The demand for Treasury bills remained robust during this period, with investors submitting bids totaling GH¢16.35 billion, surpassing the combined target of GH¢16.12 billion. This indicates a continued appetite for government securities among investors.

Yields on Treasury bills demonstrated mixed performance on a month-on-month basis. The 91-day bill witnessed a decline, reaching 29.36%, while the 182-day bill advanced to 31.95%. The 364-day bill’s yield also experienced a decline, recording a 74 basis points drop to 32.49%.

Looking ahead, analysts anticipate heightened auction uptakes in January 2023, which may exert upward pressures on T-bill yields. However, the potential for a slowdown in the rise is influenced by the ongoing trend of disinflation. Should this trend persist, there is a likelihood of a corresponding decrease in yields, reflecting the interconnected nature of inflation and Treasury bill performance.

The last auction for 2023 saw the treasury receiving bids totaling GH¢4.21 billion, surpassing the auction target of GH¢4.08 billion. Notably, the government accepted all bids, with the uptake exceeding the week’s refinancing obligation by an impressive 65%, underscoring the strong demand for government-issued securities.

As a result of the anticipation of a positive shift in the market due to portfolio adjustments, the bond market remains poised for potential growth and increased investor engagement in the coming months.