- Government Cuts Treasury Borrowing By 21% Despite Oversubscribed Auction
Ghana’s latest Treasury-bill auction delivered an unusual combination: investors offered more money than the government requested, but the Treasury accepted substantially less than its target.
The Bank of Ghana’s auction results show that investors tendered GH¢5.17 billion across the 91-day, 182-day and 364-day bills at the October 16 auction. This exceeded the government’s GH¢5.02 billion target by GH¢154.10 million, producing a bid-to-target ratio of approximately 103.07 per cent.
Government, however, accepted only GH¢3.48 billion, equivalent to 69.38 per cent of its financing target and 67.32 per cent of all bids received. Approximately GH¢1.69 billion of investor offers was therefore rejected.
That rejection is the auction’s most important signal. It shows that oversubscription does not necessarily mean the government will take every available cedi.
The outcome contrasts sharply with the preceding auction held on October 9. Bids then totalled GH¢5.06 billion, of which GH¢4.40 billion was accepted. Although investor offers increased by GH¢111.20 million, or 2.20 per cent, at the latest auction, the amount sold declined by GH¢917.93 million, or 20.86 per cent.
The overall acceptance rate consequently fell from 86.93 per cent to 67.32 per cent within one week. This points less to a collapse in investor appetite than to a widening disagreement between the rates investors demanded and those the government was willing to approve.
Demand was concentrated heavily at the short end of the market. The 91-day bill attracted GH¢2.94 billion in bids, representing 56.92 per cent of total tenders. The government accepted GH¢2.20 billion, or 74.80 per cent of the amount offered for the instrument.
Its dominance indicates that investors continue to place a premium on liquidity and flexibility. Shorter securities allow banks, funds and other investors to reassess interest-rate conditions quickly rather than commit capital for a full year.
The 91-day bill cleared at a weighted average discount rate of 4.5707 per cent and an interest-equivalent rate of 4.6235 per cent. Successful bids were allotted in full within an interest-rate range of 4.5000 per cent to 4.7499 per cent, although submitted rates reached as high as 7.3523 per cent.
About GH¢742.06 million tendered for the 91-day security was not accepted, despite the instrument recording the strongest demand and highest acceptance ratio of the three maturities.
The 182-day bill attracted GH¢1.11 billion, but the government accepted GH¢692.30 million. The acceptance ratio of 62.38 per cent was materially below that of the 91-day bill. Investors tendered rates ranging from 6.0000 per cent to 8.5208 per cent, while bids allotted fully carried interest rates between 6.1856 per cent and 6.3877 per cent.
Its weighted average discount rate settled at 6.1221 per cent, equivalent to an interest rate of 6.3154 per cent. Approximately GH¢417.54 million of six-month bids was rejected, demonstrating that selectivity extended across the curve rather than being confined to one maturity.
The one-year bill faced the strongest resistance. Investors submitted GH¢1.12 billion, slightly more than the amount tendered for the 182-day security, but government accepted only GH¢587.61 million. Its 52.52 per cent acceptance ratio was the lowest of the auction.
The 364-day bill produced a weighted average discount rate of 8.8535 per cent and an interest-equivalent rate of 9.7135 per cent. Submitted discount rates extended to 11.8943 per cent, while bids allotted in full were limited to interest rates between 9.6000 per cent and 9.8000 per cent.
The rejection of GH¢531.11 million in one-year offers suggests the government was unwilling to lock in longer funding at the most demanding rates presented by investors. It also reflects the familiar tension in Treasury management: longer maturities reduce refinancing frequency, but they generally require higher yields.
The resulting yield curve retained a clear upward slope, with interest-equivalent rates rising from 4.6235 per cent on the 91-day bill to 6.3154 per cent on the 182-day bill and 9.7135 per cent on the 364-day bill.
Investors demanded additional compensation as maturity lengthened, while government acceptance became progressively more restrictive.
This relationship is significant. The pattern indicates a preference for cheaper short-term financing, even though that choice leaves the government facing more frequent refinancing obligations.
The document does not provide the previous auction’s weighted yields, preventing a reliable week-on-week comparison of rates. It nevertheless shows clearly that the latest financing shortfall was a deliberate acceptance outcome rather than insufficient bidding. Investor demand exceeded the published target; the government simply chose not to meet that target at the rates offered.
Attention will now move to Tender 2030, for which the government has announced a reduced target of GH¢3.80 billion. The new target is GH¢1.22 billion, or 24.33 per cent, below the October 16 objective, but GH¢315.61 million above the amount actually raised.
That calibration may be an attempt to align planned borrowing more closely with the level the Treasury is prepared to accept under current pricing conditions. A lower target could also reduce pressure to accommodate high bids merely to satisfy an announced financing requirement.
The next auction will test whether investors moderate their rate expectations after the large rejection or continue to demand a wider premium, particularly for the 364-day bill. If bids remain strong and rates move closer to the government’s preferred range, acceptance could recover without reversing yield discipline.
For now, the auction presents a mixed but instructive picture. Liquidity is available, and demand for government paper remains sufficient to cover the target. Yet investors increasingly differentiate by maturity and price, while the Treasury appears determined to protect the recent low-rate environment.
The government’s restraint may reduce immediate interest costs, but the heavy dependence on 91-day borrowing creates recurring refinancing exposure. The success of the strategy will therefore depend not only on rejecting expensive bids today, but on maintaining enough investor confidence to refinance short-term obligations tomorrow without forcing yields sharply higher.
