The 7-year Ghana cedi denominated Treasury bond (Rollover), which is ready for settlement/ Issue today, November 16, 2020 made total sales of GH¢1,027.43 million, according to the Government of Ghana Securities auctioning results obtained from the Bank of Ghana.
In issuing the Treasury bond, a “Book-build format” was used, indicating that the issuance follows the release of an initial pricing guidance through the Ghana Stock Exchange (GSE).
Distribution of the bond is to be open to both resident and non-resident Investors, and in accordance with the Governing Law of Ghana, the Bank of Ghana added.
The bid rates were equivalent to the interest rate ranging from 20.3 percent and reaching up to 20.5 percent.
Similarly, the government issued a 3-year US dollar bond raising up to $388.9 million dollars at an interest extending from 4.5 percent to 4.75 percent. However, this was marketed to Investors resident in Ghana and non-resident Ghanaian Investors Only.
All bids tendered for both the 7-year Ghana cedi bond and the 3-year US dollar bond issuance got accepted by government. However, they were all ‘senior unsecured’ in terms of its security status, with a ‘bullet’ principal repayment method.
Unsecured bonds naturally carry more risk than secured bond thus, according to analysts even though the pricing remains within the current secondary market conditions, the results proposes that some uncertainties continue to remain in the market with investors mindful of the COVID-19 pandemic and other fiscal challenges in the Ghanaian economy.
Since, majority of the funds are usually used to repay maturing debts, the emergence of the coronavirus pandemic with its damaging effects required that the government keeps accepting all bids for bonds issued to enable it finance its increasing debt.
More so in recent times, government has exceeded its Treasury bills sale target for weeks running with interest rates remaining fairly stable.
The Bank of Ghana further cautioned that the issuance methodology adopted required that “all successful bids will clear at a single clearing level”.
“Discretionary allocation at the single clearing level in event of over-subscription”.
Also, the issue of methodology further mandated that aside from the application of the book-building format, bids were accepted on a yield (percentage) basis, the Bank of Ghana asserted.
The November 2020 7-year Ghana cedi denominated and 3-year US dollar Treasury bond Issuance was done through Absa, Databank, Fidelity, IC Securities, and Stanbic who served as “active joint book-runners for the bond” and are set to mature in 2027 and 2023 respectively, the Bank of Ghana remarked.