This week’s auction of GH¢2.88 billion Government Treasury bills has been oversubscribed by 75 percent with the government exceeding its target by gaining an additional GH¢2.18 billion.

The bills, carrying a maturity of 91 days, 182 days, and 364 days are issued by the Central Bank on behalf of the government. A lot of investors showed interest in the short end of the market with most of them tendering more bids for the three-month bills.

In total, bids worth GH¢1.53 billion were tendered at the Treasury auction. However, the Bank of Ghana, which manages the government’s borrowing programme accepted all bids for the 91 Day bills but rejected some bids worth GH¢350.68 million for the 181-Day bill. Analysts reveal that the rejection of the bids by the Central Bank can be attributed to investors lending at a higher rate than what the government is willing to borrow at.

Again, with level of investment geared towards shorter term securities, the three-month bills was highly patronized by investors at the treasury bill sales as they tendered in bids worth GH¢2,937.95 million at rate ranging between 30.4850-34.6163 percent. The government, however, accepted all the bills at an approximate average price of 35.5493 percent with the lowest accepted price being 33 percent and the highest being 37.89 percent.

The government auctioned GH¢665.99 million for the six-month bills at an average discount rate of 30.1918 percent for an allotted bid rate extending from 33.91 percent to 35.80 percent per annum.

Likewise, for the 364-Day bill, GH¢1,463.98 million was auctioned at an average price of 34.2136 percent with the minimum discount rate accepted being 25.3 percent extending to a maximum rate of 26.4 percent. Also, the discount rate reflects that the bills sell for less than face value.

Interest Rates Continue to Rise

For some time now, the interest rates on short-term treasury bills continue to rise following the an increase in the rate of inflation. At this auction, the interest rate on the 91-Day bill and the interest rate of both the 182- Day bills and 364-Day bills were increased to resuscitate the interest of investors in the government securities.

As a result, there has been a consistent increase in demand for short term government securities with oversubscriptions recorded since the beginning of the year. This may signal a boost in investors’ sentiment. With uncertainty in the stock market and other investments, investors are looking for a safe haven in times of uncertainty, particularly with the government’s decision not to include individual bonds in the debt restructuring, this helped to restore investors’ confidence and this translated into the purchase of government securities which carry lesser risk.

In the coming week, the government projects to borrow GH¢2,776.00 Million at its weekly securities auction. Although, the government needs to borrow to finance its budget and maturing debt as well as cover its recorded budget deficits and as such fueling its consistent borrowing from the domestic market, there are fears that this can crowd out the private sector’s access to loanable funds.

Moreover, interest rates hovered around 35.5% which is still quite high, a situation many analysts have raised concerns over. Analysts added that the interest rates are too high for the government and may cost the government more when they mature.

Meanwhile, Finance Minister Ken Ofori-Atta noted that the main financing source for the 2023 budget is treasury bills and concessional loans. According to him, this has become the case because of the closure of the international domestic bond market.

Ken Ofori-Atta made the comment when he appeared before parliament on February 16, 2023. “Mr Speaker, as the domestic international domestic bond markets are shut, for the financing of government programmes, we are relying on treasury bills and concessional primary sources of financing for the 2023 budget,” he noted.