Ghana’s Treasury bill market ended the year on a firm note as yields rose across all tenors, reinforcing concerns about tightening liquidity conditions in the domestic financial system.

Results from the Bank of Ghana’s latest auction shows that the 364 day Treasury bill recorded a weighted average interest rate of 12.94 percent, the highest among the short term government instruments on offer. The development highlights sustained investor demand for higher returns amid lingering inflationary pressures and cautious monetary conditions.

The auction, meanwhile, formed part of Tender 1987, covered the 91 day, 182 day and 364 day Treasury bills. While all three instruments attracted significant interest, the longer dated 364 day bill stood out, reflecting investor appetite for locking in yields over a longer horizon in an environment of uncertainty.

Strong demand but selective acceptance

Data from the Bank of Ghana indicate that total bids tendered for the three instruments amounted to about GH¢3.92 billion, compared with a target of GH¢3.31 billion. Of this amount, GH¢3.86 billion was accepted, signalling a generally accommodative stance by the central bank while maintaining some degree of selectivity.

The 91 day Treasury bill continued to dominate the auction, with GH¢2.45 billion tendered and GH¢2.44 billion accepted. The instrument recorded a weighted average interest rate of 11.09 percent. The 182 day bill attracted GH¢781.43 million in bids, of which GH¢726.43 million was accepted, at a weighted average interest rate of 12.52 percent. The 364 day bill saw full acceptance of GH¢686.32 million tendered, culminating in the 12.94 percent yield that has drawn market attention.

What rising 364 day yields indicate

Market analysts say the uptick in the 364 day Treasury bill yield is a clear signal of tight liquidity and elevated risk perception. Longer dated Treasury bills typically command higher yields to compensate investors for inflation risk and policy uncertainty over time. The near 13 percent yield suggests investors are demanding stronger compensation to hold government paper for a full year.

The trend also reflects expectations that monetary conditions will remain restrictive in the near term. Despite signs of macroeconomic stabilisation, inflation remains a concern, and investors appear unwilling to accept lower returns until there is clearer evidence of sustained price stability.

Comparison with previous auction

The latest auction follows the results of Tender 1986 held on December 19, 2025, which recorded even stronger demand. During that sale, total bids reached GH¢5.60 billion, with GH¢5.38 billion accepted. The moderation in bid volumes in the latest auction could indicate some easing in excess liquidity, although demand remains robust relative to government targets.

The consistency in high bid coverage ratios across recent auctions underscores the central role Treasury bills continue to play in the investment strategies of banks, pension funds and other institutional investors. In a volatile environment, short term government securities remain a preferred safe haven.

Implications for government borrowing

Rising yields, particularly on the 364 day Treasury bill, have direct implications for the government’s financing costs. While the strong demand observed at recent auctions ensures that maturing obligations can be rolled over without difficulty, higher interest rates mean the government will have to pay more to service its short term debt. Over time, this can increase pressure on public finances, especially in an environment where fiscal consolidation remains a key policy objective.

The persistence of elevated yields also underscores the delicate balance facing fiscal authorities as they seek to meet funding needs without exacerbating debt sustainability risks. As investors demand higher returns to compensate for inflation and policy uncertainty, the cost of borrowing is likely to remain elevated, limiting the scope for aggressive domestic issuance without careful planning.

The Bank of Ghana’s cautious acceptance strategy points to a deliberate attempt to manage this trade off. By not fully exhausting excess demand at the auction, the central bank retains some leverage over market rates and liquidity conditions, allowing it to influence yields while still supporting the government’s financing programme.

Outlook for the next auction

Attention is already shifting to Tender 1988, for which the government has set a target of GH¢3.99 billion for the 91 day, 182 day and 364 day Treasury bills. Given recent trends, market participants expect continued strong demand, although yields may remain elevated unless there is a notable shift in inflation dynamics or monetary policy signals.

Analysts note that investor behaviour in the upcoming auction will provide further clues about confidence in the economic outlook and expectations for interest rates in 2026. For now, the 12.94 percent yield on the 364 day Treasury bill stands as a clear indicator of tight liquidity and cautious sentiment in Ghana’s fixed income market.