Investor appetite for government securities remained remarkably strong as yields across the treasury bill curve continued to decline, with the 91-day bill dropping sharply to 5.32 percent.
The latest auction results released by the Bank of Ghana show that despite tumbling interest rates, demand for short-term instruments is still at an all-time high.
The auction recorded total bids tendered of GH¢14.82 billion, far exceeding the government’s target of GH¢5.80 billion. Out of the total bids submitted, approximately GH¢8.80 billion was accepted, reflecting a significant oversubscription and sustained investor confidence in government securities.
Yields Slide Across the Curve
The most striking development from the auction was the drop in yields, particularly on the 91-day bill. The rate declined by 113 basis points to settle at 5.32 percent. This marks a substantial fall from the previous week and signals continued easing in short-term borrowing costs for the government.
Similarly, the 182-day bill saw its yield decline to 6.87 percent from 8.18 percent. The 364-day bill also experienced a reduction, easing by 44 basis points to close at 10.20 percent.
The downward movement in yields suggests improving liquidity conditions within the financial system. It also reflects growing investor expectations that macroeconomic stability is strengthening, making lower returns more acceptable in exchange for safety and certainty.
Oversubscription Signals Strong Confidence
Despite the sharp drop in rates, investors showed no hesitation in flooding the auction with bids. The total bids tendered of GH¢14.82 billion exceeded the GH¢5.80 billion target by more than double, highlighting persistent demand for risk-free assets.
The government ultimately accepted GH¢8.80 billion, indicating that it exercised selectivity in meeting its financing needs while managing borrowing costs prudently.
The 91-day bill attracted the highest level of interest. Bids worth GH¢6.82 billion were tendered, representing 46 percent of the total bids submitted. Out of this amount, GH¢3.74 billion was accepted.
The 364-day bill also saw strong participation, with GH¢5.16 billion in bids tendered. The government accepted GH¢3.53 billion from this category.
For the 182-day bill, investors submitted GH¢2.82 billion in bids, with GH¢1.52 billion accepted.
Short-Term Instruments Remain Attractive
The dominance of the 91-day bill in this auction underscores the preference among investors for shorter maturities. In an environment where rates are falling, short-term instruments provide flexibility and allow investors to reinvest should conditions shift.
Banks, asset managers, and other institutional investors often favor the 91-day bill for liquidity management purposes. With macroeconomic indicators gradually stabilizing, many investors appear comfortable locking in funds even at lower yields, prioritizing capital preservation.
The sustained oversubscription also suggests that alternative investment avenues may not be offering significantly better risk-adjusted returns at the moment. As a result, treasury bills continue to serve as a safe haven.
Government Benefits from Lower Borrowing Costs
For the government, the decline in yields presents a clear advantage. Lower rates reduce the cost of servicing domestic debt and ease pressure on the fiscal budget. With strong demand evident at the auctions, authorities can raise necessary funds without offering excessively high returns.
Accepting GH¢8.80 billion instead of the full GH¢14.82 billion tendered also indicates a measured approach to debt management. By not absorbing all available liquidity, the government avoids unnecessary accumulation of short-term liabilities.
Market watchers believe that if current trends persist, yields may continue to moderate in subsequent auctions. However, this will largely depend on broader macroeconomic developments, inflation dynamics, and liquidity levels in the banking sector.
Market Outlook
The continued decline in yields signals improving investor sentiment. Strong participation in treasury bill auctions often reflects confidence in economic management and expectations of relative stability in the near term.
If inflation continues to ease and fiscal consolidation efforts remain on track, yields could gradually stabilize at lower levels. However, sustained demand at lower rates will depend on the attractiveness of alternative investments such as equities and corporate bonds.
For now, the treasury bill market remains robust, supported by high liquidity and investor preference for safety. The latest auction demonstrates that even with yields falling to 5.32 percent on the 91-day bill, appetite for government securities shows little sign of slowing.
The coming weeks will provide further clarity on whether this downward trajectory in yields will continue or level off as the market adjusts to evolving economic conditions.
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