Debt Exchange: Trading in new bonds begins on Fixed Income Market
Trading in new bonds under Ghana’s domestic debt exchange programme has started, with investors trading in bonds valued at approximately GHS 87bn, according to market watchers and information gathered by Norvanreports. The new and old government bonds are listed and available for trading, with the new bonds valued at about GHS 87.8 billion being credited to the account of the central securities depository. This paves the way for interested investors to trade them, enabling trades in fixed income instruments such as bonds.
Market analyst Kojo Letsa stated that while the old bonds held some superiority over the new bonds, the new bonds were seeing traction and decent sizes of them were being traded. “So far we’ve seen decent sizes of the new bonds being traded with some maturing on August 2027, and then 2028. We’ve seen decent sizes of them being offered but just around the 10% yield region, but not so much in the old bonds. So I reckon, in the coming days or probably in the coming weeks. We should see some more action in the new bonds. It’s a new area that we haven’t experienced yet in our markets. So we’re still trying to understand what is going on,” he said.
Meanwhile, reports indicate that the government is still swapping old bonds for new ones under the domestic debt exchange programme, despite the programme having come to an end on February 10, 2023. According to reports, some GHS 4.9bn in bonds have recently been tendered by investors to be included in the debt exchange programme. This brings the overall tendered bonds to over GHS 87.8bn from the previous amount of GHS 82.9bn.
While the tendering of old bonds for new ones under the debt exchange programme is good news for the government as it will help reduce the government’s debt burden, it also raises questions about transparency in the whole process. The government has not indicated which investors are taking up the new bonds or what government debt instruments they are exchanging for these new bonds. This lack of clarity has created some anxiety within the market, and the government may have to come out clear on this issue.
This development comes as the Ghanaian government looks to address its rising debt levels. Ghana’s total public debt as of September 2021 stood at GHS 354.6bn, representing 74.4% of GDP, according to the Bank of Ghana. The government is seeking to bring down the country’s debt levels to more sustainable levels to improve the economy’s prospects.
In this regard, the government has initiated several measures to manage its debt, including the domestic debt exchange programme, which aims to swap high-interest-bearing bonds with lower-interest-bearing ones. The government is also pursuing a debt sustainability programme with the International Monetary Fund (IMF) to manage its debt levels effectively.
However, the success of these measures depends on the government’s ability to maintain transparency and communicate clearly with the market. The lack of information about the exchange programme has raised concerns about the government’s commitment to transparency, potentially impacting investor confidence in the market.
While the commencement of trading in new bonds under Ghana’s domestic debt exchange programme is a positive development for the country’s debt management efforts, the lack of transparency in the programme’s execution raises concerns about the government’s commitment to transparency. The government needs to provide more information on the programme to reassure the market and sustain investor confidence.
