T-Bills auction sees 20.34% undersubscription amid yield gains
The Bank of Ghana’s Treasury bills auction worth a substantial GH¢3,790.00 million experienced an unexpected turn as it faced a modest demand, ultimately falling short by 20.34% of its target. This undersubscription raised concerns and pointed to the prevailing sentiment among investors. At the end of the auction, T-bills worth GH¢2,394.83 million, GH¢521.12 million, and GH¢99.79 million were accepted for the 91-Day, 182-Day, and 364-Day bills, respectively.
The undersubscription, indicating subdued investor appetite, is an intriguing development within Ghana’s financial landscape. With an acceptance rate of 99.89%, it is evident that the Treasury bills auction failed to attract significant interest. This lukewarm response can be attributed to a combination of factors, including prevailing economic conditions, market sentiment, and investors’ risk appetite.
In terms of yield movement, the 91-Day and 182-Day bills recorded notable gains in their respective yields, with increases of 42 basis points (bps) and 102 bps. The 91-Day T-Bills settled at a yield of 21.69%, while the 182-Day T-Bills settled at 24.97%. Meanwhile, the 364-Day T-Bills observed the highest yield gain of 109 bps, settling at 28.91%. These yield adjustments are indicative of the perceived risk and reward dynamics within the market, and they offer insights into investors’ expectations for short-term and long-term interest rates.
The yields’ upward trajectory in the shorter-dated Treasury bills signifies an increased demand for short-term, more liquid instruments, likely driven by risk aversion and a desire for capital preservation. In contrast, the longer-dated 364-Day T-Bills experienced a relatively smaller yield gain, suggesting a higher risk appetite among investors willing to lock in their funds for a longer duration.
Looking ahead, the Bank of Ghana has set a target of GH¢2,202.00 million for the next auction, designated as Tender #1856. This reduction in the target amount may reflect the cautious approach of the central bank in response to the recent undersubscription. By reducing the auction size, the Bank of Ghana aims to align the supply of Treasury bills more closely with the demand from investors, fostering a healthier market dynamic.
Market participants and analysts will closely monitor the upcoming auction to assess the response of investors to the adjusted target. Should the reduced target be met or oversubscribed, it may indicate renewed confidence and appetite for Ghanaian Treasury bills. Conversely, continued undersubscription might raise concerns about the overall investor sentiment and could prompt the central bank to further recalibrate its auction strategies.
