The interest rates on short-term Treasury bills fell marginally at the weekly auction of the Government of Ghana’s securities held today June 21, 2021.

The Bank of Ghana, which manages the government’s borrowing programme auctioned 91- Day bills at 12.6269 percent which is a slight drop on the previously auctioned rate which was at 12.6395 percent. Also, this week’s 182-Day bills was auctioned at a rate of 13.3897 percent compared to the previous rate which was at 13.4203 percent.

Discount Rate

In terms of discount rates, the government auctioned GH¢3.7 billion for the three-month bills at a discount rate of 12.2405 percent. This discount rate is lower than that of the immediate past auction which was at 12.2523 percent.

Likewise, for the six-month bills, GH¢500 million was auctioned at a discount rate of 12.5495 percent per annum as against 12.5764 percent for the previous auction. Meanwhile, the discount rate is the rate used to determine the present value of future cash flows of an investment.

Moreover, the Government of Ghana has also auctioned one long term bond in addition to the short term securities. A seven year FXR Bond was auctioned at a rate of 18.10 percent. However, the discount rate remained unchanged as it has a discount rate of 18.10 percent. The targeted value for the 7 year FXR bond is Ghc1.8 billion

Even though, the government needs to borrow to finance its budget, repay maturing debt and cover its budget deficits, there are fears that this consistent borrowing from the domestic market may crowd out the private sector’s access to loanable funds.

However, experts say if the government sticks to its borrowing calendar, the private sector will have enough funds for investment.

Moreover, some analysts are worried that the drop in the interest rate will affect the demand for the government’s short term securities. However, other experts disagree saying the change in the interest rate is too small to affect the demand for the Treasury bills.

The Bank of Ghana today June 21, 2021 has published a Government’s issuance calendar for June to August, 2021 detailing the dates that the various bonds will be auctioned.

For the period in question, Government plans to issue a gross amount of GH¢21.96 billion, of which GHȼ19.86 billion is to rollover.

For next month, the government projects to auction GHc3.7 billion for the 91-Day T-bills, GHc530 million for the 182-Day T-bills, GHc300 million for the 364-Day and GHc1.8 billion for the 3 year and 6 year bonds each.

Oversubscription

Meanwhile, the Treasury bills of last week auction was oversubscribed, with the government exceeding its target. In all, the Central Bank received bids worth GH¢1.34 billion as against its target amount of GH¢1.17 billion. This led to an oversubscription of 14 percent.

However, the Bank of Ghana rejected a whooping GH¢170 million worth of bids tendered for both the three-month bills and six-month bills. According to analysts, this could be as a result of some of bids coming in at a higher rate than what the government is willing to borrow at.

These figures further indicate investors’ interest in the short end of the market as purchase of government’s short term securities continue to soar with more preference for bills maturing within 91 days.