Ghana’s treasury bill (T-bill) market is showing clear signs of stress, with analysts warning of sustained strain in the coming weeks.
Databank Research, a leading financial advisory and investment research firm, has sounded the alarm over the challenges the government faces in mobilizing short-term funds, highlighting persistent liquidity pressures and rising yields across the market.
Recent auction results underscore the difficulties facing Ghana’s T-bill market. At last week’s auction, the Treasury mobilized GHS 3.83 billion, falling 30.46% short of the targeted GHS 5.68 billion. This shortfall illustrates a broader reluctance among investors to participate in government debt issuance at prevailing rates.
Databank analysts note that weak bid volumes are symptomatic of deeper structural issues. “Investors are increasingly demanding higher returns to compensate for short-term lending risks,” the firm highlighted. The combination of tight liquidity and investor caution is creating a challenging environment for government borrowing, pushing yields upward and making short-term financing more expensive.
The government’s 2026 Budget indicates even greater reliance on T-bills to rebuild cash buffers. Analysts warn that this strategy may exacerbate existing pressures on the market. By depending heavily on short-term instruments, the government risks keeping yields elevated, particularly if liquidity does not improve significantly.
This heavy reliance reflects expectations of sustained funding demand, as the government aims to manage large rollover obligations while meeting fiscal commitments. However, Databank cautions that without a boost in market liquidity, the T-bill market may face prolonged volatility, increasing the cost of borrowing for the state.
Yields Continue Upward Drift
The persistent shortfalls in T-bill auctions have contributed to a noticeable upward drift in yields across the curve. Databank emphasizes that the pace of these yield adjustments will depend on two critical factors: the Monetary Policy Rate (MPR) and the broader liquidity environment.
With liquidity remaining tight and investors hesitant to commit funds, treasury financing is likely to remain costly in the near term. Elevated yields could have wider implications for the economy, increasing borrowing costs not only for the government but also for businesses and households reliant on credit.
Liquidity constraints remain at the heart of the T-bill market strain. Despite repeated efforts by the government to raise funds, investor caution persists. Many market participants are seeking higher compensation to lend in an environment of uncertainty and constrained liquidity.
Databank highlights that improving liquidity conditions is essential for stabilizing the T-bill market. Until such improvements materialize, analysts expect short-term borrowing to remain challenging and expensive, with little immediate relief for the government’s funding strategy.
Implications for the Economy
The stress in the T-bill market has implications beyond government financing. Rising yields on short-term instruments can increase the cost of capital for commercial banks, which often benchmark lending rates against treasury yields. This can translate into higher borrowing costs for businesses, potentially slowing investment and growth.
Moreover, sustained strain in the T-bill market may erode investor confidence if left unaddressed. Analysts warn that continued underperformance in auctions could signal deeper structural vulnerabilities in the government’s short-term financing framework, necessitating careful management of fiscal and monetary policies.
Meanwhile, market watchers anticipate a challenging period for Ghana’s treasury bill market. Databank’s warning suggests that the government’s dependence on T-bills, combined with liquidity constraints and investor caution, could keep yields elevated for an extended period.
The trajectory of the T-bill market will likely hinge on improvements in liquidity and strategic adjustments in borrowing approaches. While the Monetary Policy Rate and broader economic conditions will influence investor behavior, proactive measures may be necessary to restore stability and ensure efficient short-term financing.
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