Barely a week after the government forex forward auction oversubscribed by GH¢ 131.95 million, the weekly Treasury bills sale to the domestic investors, however, fell short of its target by about approximately 35%. The BOG had targeted GH¢ 830 million in domestic sales to investors but received only GH¢ 540.57 million.
The massive drop in short-term instruments sales could be attributed to the government’s decision to maintain interest rates low in order to lessen the cost of financing debt instruments in the future.
According to the statistics from the Bank of Ghana, the Government of Ghana accepted GH¢ 441.23 million from 91-day T-Bills and GH¢ 99.34 million from 182-day T-Bills.
The government actually turned down some of the investor bids, despite the fact that it desperately needed more money to service its domestic obligations. This could be as a result of domestic investors’ high interest rates which could not be sustained by the government. Financial institutions, mainly banks, made up the majority of the domestic investors.
Specifically, investors shifted their attention to the 91-day bill as it was the most subscribed risk-free bill among the T-bills auctioned. GH¢ 441.23 million were tendered for the three-month bill and all that amount was accepted by the government. This bill is the most recommended for pensioners and the elderly because of their frequent need of cash as it has the lowest maturity date. The three-month bill was auctioned at 12.51% which is the same as the previous auction rate for the bill. The lowest rate for which investors were willing to trade for the bill was 12.37% and the highest those investors were willing to trade was 12.56%.
For the half-year bill, GH¢ 100.90 million was tendered for the bill and only GH¢99.34 million were accepted. This could be due to investors’ intransigence in lowering their rates for the bill. The six-month bill was auctioned for 13.19 percent of its face value denoting a decrease in its previous auction rate of 13.20 per cent. The least rate at which investors were willing to trade for the bill was 12.99 percent, while the highest rate at which they were willing to trade was 13.25 percent.
Meanwhile, the 364-day bill, the 2-year Foreign Exchange rate (FXR) and The 5-year Foreign Exchange rate (FXR) had a quiet week, as no bills were tendered for it, and none were accepted.
Discounted rates for the investment bills
The discounted rate, the amount investors get when they buy an investment bill in excess of its face value, was 12.13 per cent for the 91-day bill as against 12.128 per cent previously in the December 20th auction. The lowest discounted rate for the 91-day bill was 12 per cent and the highest for the bill was 12.18 per cent.
The 182-day bill was auctioned at a discounted rate of 12.37 per cent. The lowest discounted rate for the 182-day bill was 12.2 per cent and the highest for the bill was 12.43 per cent.
The Bank of Ghana announced that the Government of Ghana’s total target for the 91-day bill, 182-day bill and the 364-day bill is GH¢919 million for next week’s auction. This is approximately an 11% increase in the last week’s previous target of GH¢830 million. Investors should be on the lookout due to the government’s haste to settle its domestic debt with less than a week to go before the end of the year, and the fact that it missed its risk-free bills target by 35%. As a result, the government may be willing to tolerate higher interest rates than those currently in place.
