Investors in Ghana have demonstrated their continued desire for short-term debt securities, as the Bank of Ghana’s latest Treasury bills auction worth GH¢1,585.00 million was oversubscribed by 30.49%.
At the close of the auction, T-bills worth GH¢2,048.17 million and GH¢538.13 million were accepted across the 91-day and 182-day bills, respectively. This was despite the accepted bids being marginally below tendered bids, representing a 99.95% acceptance rate.
The 91-day and 182-day T-Bills recorded gains of 9 basis points (bps) and 13 bps, respectively, in their respective yields, settling at 19.95% and 22.71%, hence reflecting the market’s favorable outlook for these short-term debt instruments. This underscores the increasing demand for safe and liquid assets amid a challenging macroeconomic environment characterized by rising inflation and a weakening currency.
Looking ahead, the Bank of Ghana has announced a target of GH¢1,585.00 million for the next auction (Tender #1849) covering 91-day, 182-day, and 364-day T-Bills. This signals the regulator’s commitment to maintaining a stable domestic debt market while financing the government’s fiscal operations.
This trend is expected to persist in the near term, as investors seek to mitigate risks associated with long-term investments and inflationary pressures.
The robust appetite for T-bills also bodes well for the government’s debt management strategy, which aims to reduce the cost of borrowing and extend the maturity profile of domestic debt.
Government Borrowed ¢8.25bn Via T-Bills In April 2023
The Government of Ghana borrowed Gh¢8.25 billion on the treasury market in the month of April 2023, 18.20% above its gross target. The funds were used to refinance maturities worth ¢6.3 billion.
The 91-day and 182-day yields ticked higher at 19.95% (+56 basis points month-on-month) and 22.71% (+85 basis points month-on-month) respectively.
The 364-day settled at 27.26% (+160 basis points month-on-month).
Some financial and market analysts perceive yields might settle lower at the end of May 2023 due to the improving economic outlook, though there is scope for a further rise this week.
According to an investment firm known as IC Securities, yields will resume the downturn in late 2023 with the IMF programme as a catalyst.
After plummeting from a peak of 35.0% to between 18.5% and 26.8% by mid-March 2023, yields on T-bills have found renewed upward drive from the unexpected 150 basis points hike in the policy rate.
In the near-term, the Treasury’s continued dependence on the money market, without an active primary bond market, will hold yields elevated around current levels of between 19.0% – 27.0%.
Analysts expect trading in T-bills will continue dominating the secondary fixed-income market in 2023 amidst the lack of price action on the bond market.
This, as indicated by analysts, is expected to drive down trading yields with a spillover to the primary market for T-bills, supporting the downside view on yields by full year 2023.
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