Ghana’s primary market is expected to remain under sustained pressure in the near term, despite a marginal uptick in yields on the 182-day Treasury bill.
This is the expert view of Isaac Kwasi Mensah, Financial Analyst and Portfolio Manager at SIC Financial Services Limited, who spoke to The Vaultz News in an in-depth interview on the evolving dynamics of the domestic debt market.
According to him, the recent Treasury bill auction results reflect a market that is still grappling with cautious investor sentiment, even as yields attempt to adjust upward to attract participation.
Undersubscription Signals Lingering Investor Hesitation
The government’s inability to meet its Treasury bill target for the sixth consecutive week has become a defining feature of the current primary market environment. While the latest auction recorded only a marginal undersubscription of about one percent, the pattern itself raises concerns about demand sustainability.
“When you see six consecutive weeks of undersubscription, even if marginal, it points to a deeper issue beyond just weekly liquidity fluctuations. It suggests that investors are still weighing risks carefully and are not entirely convinced about current pricing levels.”
Isaac Kwasi Mensah
Data from the Bank of Ghana showed that total bids came in at GH¢4.43 billion against a target of GH¢4.47 billion, with approximately GH¢3.8 billion accepted. For Mr. Mensah, this gap, though small, is psychologically significant.
“Markets are driven as much by sentiment as by numbers,” he said, explaining that “Even a slight miss can reinforce cautious behaviour among institutional investors.”
Rising 182-Day Yields Offer Limited Relief
One of the key highlights of the latest auction was the increase in the yield on the 182-day bill, which rose by 6.0 basis points to 6.96 percent. In theory, higher yields should incentivise investors. However, Mr. Mensah believes the impact may be limited.
“The uptick in the 182-day yield is a step in the right direction, but it is not sufficient to trigger a strong rebound in demand. Investors are looking for a more consistent upward adjustment across the curve before repositioning their portfolios.”
Isaac Kwasi Mensah
He added that while some investors may take advantage of the improved yield, others remain cautious due to broader macroeconomic uncertainties and liquidity considerations.
In his words, “yield increases must be both meaningful and sustained to shift investor behaviour in a noticeable way.”
Short-Term Instruments Continue to Dominate
The auction results also revealed a continued preference for short-term instruments, particularly the 91-day bill, which accounted for over 62 percent of total bids. This trend, according to Mr. Mensah, reflects a market that is still prioritising flexibility and risk management.
“Investors are clearly favouring the short end of the curve. The strong demand for the 91-day bill indicates a desire to maintain liquidity and minimise exposure to duration risk.”
Isaac Kwasi Mensah
He elaborated further:
“In uncertain environments, short-term instruments provide an exit option. Investors can reassess conditions more frequently, which is why the 91-day bill remains attractive despite its slightly lower yield.”
Isaac Kwasi Mensah
The 364-day bill, on the other hand, saw weaker uptake relative to bids, reinforcing the notion that longer tenors are currently less appealing.
Mixed Yield Curve Reflects Market Uncertainty
The broader yield curve presents a mixed picture. While the 182-day yield increased, the 91-day yield declined slightly to 4.92 percent, and the 364-day yield remained unchanged at 10.12 percent. For Mr. Mensah, this divergence underscores the uncertainty shaping the market.
“A mixed yield curve often signals indecision. It tells you that the market has not fully settled on a clear direction, and that creates hesitation among investors.”
Isaac Kwasi Mensah
He added that such conditions make it difficult for policymakers to strike the right balance between cost of borrowing and investor attraction. “On one hand, the government wants to minimise borrowing costs. On the other, it needs to offer competitive rates to attract sufficient demand,” he explained.
Outlook: Continued Pressure in the Near Term
On the outlook, Mr. Mensah projects that Ghana’s primary market will continue to face pressure in the coming weeks, particularly if investor sentiment does not improve significantly.
“In the near term, I expect the primary market to remain under pressure. We may see occasional improvements in subscription levels, but a sustained recovery will require stronger confidence drivers.”
Isaac Kwasi Mensah
He pointed to factors such as macroeconomic stability, inflation trends, and fiscal discipline as critical to restoring investor confidence.
“Confidence is built over time,” he emphasised. “It depends on consistent policy signals, stable macro indicators, and a clear commitment to fiscal prudence.”
At the same time, he acknowledged that gradual yield adjustments could provide some support.
“Higher yields will attract some level of demand, but they are not a silver bullet,” he remarked. “The market needs a combination of attractive pricing and improved economic outlook.”
A Market in Transition
In the intervening time, Mr. Mensah described the current state of Ghana’s primary market as one of transition. While challenges persist, there are also signs of gradual adjustment as both issuers and investors adapt to evolving conditions.
“We are in a transition phase. The market is recalibrating, and that process takes time. Pressure is expected, but it is also part of the journey toward stability.”
Isaac Kwasi Mensah
For investors and policymakers alike, the coming weeks will be critical in determining whether the market can move beyond its current constraints or remain caught in a cycle of cautious participation.
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