By Deborah Pofara Luu
In a recent treasury bill auction, the government rejected a staggering GH¢10.865 billion in bids, despite recording a 140.5% oversubscription with total bids reaching GH¢20.49 billion.
The government accepted GH¢9.634 billion, exceeding its target of GH¢7.72 billion. The 364-day bill attracted the highest bids at GH¢8.11 billion, with GH¢3.96 billion accepted.
The 91-day bill saw bids of GH¢7.38 billion, with GH¢4.23 billion accepted, while the 182-day bill received GH¢5 billion in bids, with GH¢1.43 billion accepted.
The strong demand for treasury bills reflects investors’ confidence in these short-term instruments, especially given the limited investment options available post-domestic debt restructuring.
Economist Eugene Bawelle noted, “The drop in T-Bill rates is positive as it reduces the government’s debt servicing costs, which is crucial for Ghana given its recent debt challenges.” He emphasized the importance of these lower rates trickling down to benefit businesses and individuals through reduced lending rates.
Interest rates on these securities have significantly declined, with the yield on the 91-day bill dropping by 238 basis points to 24.47%, the 182-day bill to 25.38%, and the 364-day bill to 27.29%.
This decline is attributed to the government’s strategy of rejecting high-interest bids and maintaining a firm stance on yields. Databank Research expects continued bid rejections to support yield compression in the coming weeks.
The government’s reliance on treasury bills remains high due to its limited access to the international capital market. Despite this, the strong appetite for T-bills and declining interest rates are seen as positive signs for the economy.
As Mr. Bawelle highlighted, maintaining investor goodwill is crucial for further rate reductions. The government aims to raise additional funds through future auctions, with plans to borrow GH¢6.49 billion in the next auction.
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