The Treasury bills was oversubscribed as interest rate hits 36 percent while the Government of Ghana has exceeded its target for the weekly Treasury bill auction after several weeks of consecutively missing its target.
According to experts, the recent surge in demand for the government of Ghana T-bills can be attributed to the hike in interest rates which might offset the fears of hair cut by the Bank of Ghana.
The weighted average interest rate hovered around 35.5 percent for the 91-Day bill compared to 29.11 percent of the previous issue. Also, for the 182 Day-bill average interest rate rose to 36.3 percent adding about 3 percentage points to the previous weeks rate. The 364-day bill was also sold at 35.8 percent.
Detailing the government securities auction made, the government auctioned GH¢2,066.12 million in three-month bills, which dominated the treasury bill sales.
The results showed that the GH¢2,066.12 million bids were accepted from the 91-day treasury bill. Similarly, GH¢223.55 milion was accepted from the 182-day bill, and GH¢101.71 million for the 365-day bill.
The target for the auction however was GH¢2,176 million but GH¢2,392.27 million was realized from the auction.
Returns on the Instrument Still Negative
However, despite the increasing interest rates, the returns on the instrument are still negative due to the high inflation and the depreciation of the cedi.
Inflation for the month of October stood at 40.4 percent whiles the Ghana cedi has depreciated by 54 percent according to the Bank of Ghana.
According to some analysts, the increase in this week’s subscription may be an indication of increasing investor confidence as the last week’s bills were also over-subscribed. However, others believe government’s decision to increase interest rates bolster the interest of investors.
Just yesterday, November 28, 2022, the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) announced that it has raised the policy rate by 250 basis points to 27.0 percent after concluding its 109th meetings which took place last week.
As a result of the high interest rates, the money markets has indeed entered a new phase in an ebullient mood as investors’ confidence boost despite the economic devastation wrought by the mismanagement of the economy by the government, the devastating effects of the coronavirus pandemic, and the Russia-Ukraine war.
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