- Government Accepts GH¢5.85bn From GH¢14.27bn Treasury Bill Demand
Investor demand for Ghanaian Treasury bills strengthened sharply at the latest government auction, with total bids reaching GH¢14.27 billion against a target of GH¢5.43 billion, as investors concentrated heavily on the 364-day instrument despite the government accepting only a fraction of the amount offered.
The Treasury accepted GH¢5.85 billion across the 91-day, 182-day and 364-day bills at Tender 2021 held on August 21, with the securities issued on August 24. That placed total accepted bids about 7.86% above the government’s GH¢5.43 billion target, while overall demand was more than 2.60 times the amount authorities had planned to raise.
The scale of bidding provides another indication of strong liquidity in Ghana’s short-term government securities market, but the composition of the auction tells an equally important story. Investors submitted almost GH¢9.94 billion for the 364-day bill alone, dwarfing demand for the shorter maturities and suggesting substantial appetite to lock funds away for longer at rates above those available at the short end of the Treasury curve.
The government, however, accepted just GH¢2.69 billion of the GH¢9.94 billion submitted for the one-year instrument, representing an acceptance rate of approximately 27.01%. That rejection of nearly three-quarters of the bids indicates that authorities were unwilling to satisfy demand indiscriminately, particularly where investors sought yields above the levels government was prepared to pay.
The weighted average interest rate on the 364-day bill settled at 11.59%, compared with 7.08% for the 182-day bill and 5.08% for the 91-day instrument. The resulting yield structure shows a sizeable premium for investors prepared to extend duration, with the one-year bill yielding more than twice the return on the 91-day security.
Lower short-term Treasury rates can reduce the government’s immediate refinancing cost, but investors demanding substantially higher returns for longer maturities may still be pricing uncertainty around inflation, future monetary conditions and the sustainability of the current macroeconomic environment. The curve therefore reflects both confidence and caution: investors are willing to lend for a year, but they require considerably more compensation for doing so.
Demand for the 91-day bill reached GH¢3.12 billion, of which GH¢2.40 billion was accepted, producing an acceptance rate of approximately 76.93%. For the 182-day instrument, investors submitted GH¢1.20 billion and government accepted GH¢766.21 million, equivalent to about 63.59% of bids received.
Government accepted most of the bids submitted at the shorter end while rejecting a much larger share of one-year offers, despite the 364-day instrument attracting by far the strongest absolute demand. That suggests the auction was not simply about maximising the amount raised, but also about controlling the cost at which government borrowed.
Investors submitted rates between 4.65% and 6.00% for the 91-day bill, 6.65% to 8.63% for the 182-day bill and approximately 9.91% to 12.00% for the 364-day instrument. The rates allotted in full were narrower, topping out at about 5.25% for the 91-day bill, 6.90% for the 182-day bill and 10.60% for the 364-day bill on a discount-rate basis.
That gap between bids received and bids accepted is an important signal of pricing discipline.
A government confronted with strong liquidity can afford to reject more expensive bids, particularly if its immediate financing needs are already covered. The danger arises when a sovereign becomes so dependent on short-term funding that it has little choice but to accept whatever rates investors demand.
Total accepted bids of GH¢5.85 billion were also significantly higher than the GH¢4.88 billion sold in the previous Treasury bill auction held on August 14. On a simple comparison, the amount accepted increased by approximately 19.94%, while total bids rose from GH¢11.28 billion to GH¢14.27 billion, an increase of about 26.50%.
As inflationary conditions have moderated and broader market rates have declined, investors who previously enjoyed exceptionally high returns on short-duration government paper are having to reassess where to place capital. Treasury bills remain attractive because of their liquidity and sovereign status, but the difference between maturities is increasingly important.
Investors willing to extend duration can secure a weighted average interest rate of 11.59%, significantly above the 5.08% available on the three-month bill. If they believe interest rates will continue falling over the next year, locking in the longer-dated rate today becomes particularly attractive. That may partly explain why the one-year bill attracted nearly 70.00% of all bids submitted at the auction.
Strong appetite for longer-dated bills could allow the Treasury gradually to reduce its reliance on very short-term maturities, lowering the frequency with which debt must be rolled over. A debt portfolio concentrated excessively in 91-day instruments exposes government to repeated refinancing risk because large obligations must be replaced every three months.
Extending maturity therefore matters even when the instruments remain classified as Treasury bills.
Government must determine how much additional interest it is willing to pay in exchange for longer financing certainty. At the latest auction, the premium between the 91-day and 364-day weighted average interest rates was more than six percentage points, illustrating that maturity extension does not come free.
That trade-off will become increasingly important as Ghana rebuilds its domestic debt market after the disruption of the Domestic Debt Exchange Programme.
Authorities need to restore investor confidence while simultaneously ensuring that the cost of borrowing remains sustainable. Driving yields down too aggressively could discourage participation, while accepting unnecessarily high rates would weaken the fiscal benefit from Ghana’s improving macroeconomic environment.
The next auction will target GH¢5.15 billion across the three Treasury bill maturities, slightly below the GH¢5.43 billion target for the latest tender. That smaller target will provide another test of the strength of investor demand and the government’s willingness to reject bids where pricing does not meet its expectations.
For now, the headline from the latest auction is not simply that government raised GH¢5.85 billion. It is that investors were prepared to offer GH¢14.27 billion, with almost GH¢10.00 billion chasing the one-year security.
If such demand persists, Ghana may have an opportunity to lengthen its domestic funding profile while continuing to push borrowing costs lower. But how successfully that opportunity is used will depend on maintaining the balance between attracting investors, controlling interest costs and avoiding another cycle in which short-term domestic debt becomes an increasingly expensive substitute for durable fiscal discipline.
