Joe Jackson, Finance expert and Director of Operations at Dalex Finance has urged the Government of Ghana (GoG) to reduce Treasury bill rates further to about 15% to further cut down its interest costs, and consequently lending rates.
Last week, the government brought the yield on T-bills down to an average of about 25.50%, saving it about ¢220 million interest costs. The rates further went down to about 22.50% averagely on Friday, March 10, 2023.
Indications are that, interest on short term securities will fall again in subsequent weeks because of increased demand. Mr. Jackson, speaking during an interview with the media urged for an immediate action by the government to further bring the T-bill rates down.
“Government is the government. It can indicate to the market that, come to me with lower bids. It doesn’t have to wait for the bids to come in and reject it.
“The government can say come to me with lower bids, I won’t be buying at higher bids, and indicate it clearly and use the market and drive it down. If the bids come and you don’t like them, don’t buy. Wait! After all, you are oversubscribing.”
Joe Jackson
Prior to this close discussion with the finance expert, he predicted that Treasury bill rates may further come down in subsequent weeks, noting that, the expected downward trend in T-bill rates will consequently cause a reduction in lending rates.
“I truly believe that the rates are going to be driven downwards because, at 24.5%, we were oversubscribed. That’ evident that the rates can come down more and more. We have to get to a point; even when we are going to lend to government, we are not completely crowding out the private sector.”
Joe Jackson
Meanwhile, interest rates remarkably fell significantly within just a week, following the government’s decision to reject bids with higher yields.
Bank of Ghana’s latest auction reveals a fall in the 91-day yield from 24.16% for the previous week ending to 19.04%. From a high of 35% a week ago, interest rates on the short term securities is observed to have dipped significantly on the yield curve.
Whereas the 91-day bill yield is seen to have plummeted by 16%, that of the 182-day bill plunged by about 13%, going for 22.84%.
The 364-day T-bill, like the 91-day bill, dropped by about 9% to 26.82% on Friday, March 10, 2023.
This significant drop in yield of T-bills implies that government will further be saving more interest costs, resulting in a further reduction of lending rates.
As has been the case during the past week with government saving about ¢220 million from the reduction in T-bills yields, the expectations of analysts and market watchers are for the rates to further decline in the weeks unfolding.
Government makes ¢4.20 billion from the sale of T-bills
Government secured about ¢4.20 billion from the sale of T-bills, which is about 74% oversubscription, accepting a total of ¢3.31 billion bids.
As a breakdown, the 91-day T-bill made about ¢1.99 billion whereas the bids for the 182-day T-bill was estimated at ¢1.16 billion. For the 364-day bill, government secured ¢1.05 billion, with the government accepting ¢959 million of the total bids.
Government however accepted ¢1.43 billion and ¢924 million for the 3-months and 6-months bills.
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