Bullish sentiments held sway this week across all segments of the fixed income market as Government of Ghana Treasury bills was oversubscribed, and in the process bagging GH¢1.54 billion.
In the Ghanaian short term securities market, sell-offs were witnessed as investors began seeking higher returns which, in turn, led to an increase in the average yields across the 91 day, 182 day and 364 day Treasury bills.
The reluctance of investors caused interest rates to surge, surpassing the 24 percent mark.
Consequently, the Government exceeded its Treasury bills sale target by 16.5 percent, a week after failing to achieve the target for the auctioning of the short term securities. Following the previous auction’s high undersubscription, this is a tremendous relief for the government.
The increase in interest rates may have contributed to the successful sale of the short term instruments.
A cursory analysis of the data indicates that the investors, largely the banks prefer the 91-day T-bills, as it was overwhelmingly oversubscribed by over GH¢1 million. The total 91 day bills accepted amounts to GH¢1.293 billion of the GH¢1,311.89 million tendered, whiles that of the six months bills also amounted to GH¢211 million out of the GH¢231 million tendered.
Interest Rates on Treasury Bills
Interest rate on the 91-day T-bills which was the most patronised went up from 23.69 per cent in the previous week to 24.5 per cent, whilst that of the 6-months bill also shot up to 25.98 percent, from 25.4 percent that was previously recorded.
Meanwhile, the rising interest rates on the domestic market indicates that government will pay more interest on these financial instruments when they mature.
According to the May 2022 Monetary Policy Report by the Bank of Ghana, total interest payments amounted to GH¢10.608.billion over the review period, higher than the envisioned target of GH¢10.037 billion. The development led to the rising domestic debt stocks.
Discount Rates for the Bills
The discounted rate, the amount investors get when they buy an investment bill in excess over its face value, for the 91-day bill was 23.2462 per cent. The lowest discounted rate for the 91-day bill was 22.3735 per cent and the highest for the bill was 23.9718 per cent.
Additionally, the 182-day bill was auctioned at a discounted rate of 22.9958 per cent. The lowest discounted rate for the 182-day bill was 22.2200 per cent and the highest for the bill was 23.4000 per cent.
The Central Bank announced that in the next auction, the government of Ghana’s total target for the 91-day bill, 182-day bill and the 364-day bill will be GH¢1,311.00 million.
Meanwhile, experts and market watchers are of the hope that the improved liquidity will be sustained in the upcoming auctioning that will be held on Friday, June 24, 2022.