Strong demand for T-bills as auction is oversubscribed by 121.64%
Ghana’s latest Treasury bills auction has shown that the demand for T-bills remains strong, with the auction being oversubscribed by an impressive 121.64%.
The Bank of Ghana’s auction of T-bills worth GH¢2,776.00 million, which was held on a competitive basis, saw accepted bids worth GH¢4,525.50 million being distributed across the three tenors: GH¢1,476.78 million for 91-Day bills, GH¢1,166.70 million for 182-Day bills, and GH¢1,882.02 million for 364-Day bills.
The acceptance rate of 73.55% indicates that not all bids were accepted, which could be due to the high demand for T-bills in Ghana. The acceptance rate could also be influenced by the Bank of Ghana’s strategy to limit the size of accepted bids to avoid putting undue pressure on the country’s financial system.
One noteworthy aspect of the auction results is the significant decline in yields on the T-bills compared to the previous auction. The 91-Day, 182-Day, and 364-Day bills recorded declines of 1139 basis points (bps), 900 bps, and 667 bps, respectively, to settle at 24.16%, 26.56%, and 27.54%. This suggests that the Bank of Ghana is attempting to lower the cost of borrowing for the government and stimulate economic activity.
The high demand for T-bills in Ghana could be attributed to several factors, including high inflation and the need for investors to protect their purchasing power. Ghana’s annual inflation rate stood at 10.3% in January 2023, up from 9.8% in December 2022, which is well above the Bank of Ghana’s target range of 8±2%. This has increased the demand for T-bills as investors seek to protect their investments against the eroding value of the Ghanaian cedi.
Furthermore, the Ghanaian economy has been hit hard by the COVID-19 pandemic, with the IMF projecting a 1.2% contraction in real GDP in 2020. The Bank of Ghana has implemented several measures to support the economy, including a reduction in the policy rate from 14.5% to 13.5% in November 2021, and an expansionary monetary policy stance. The high demand for T-bills could be an indication that investors are confident in the Bank of Ghana’s ability to steer the economy back to growth.
Looking ahead, the Bank of Ghana has set a target of GH¢2,417.00 million for the next auction, Tender #1841, in 91-Day, 182-Day, and 364-Day T-Bills. The auction results will be closely watched by investors and analysts, as they provide insights into the state of the Ghanaian economy and the demand for T-bills. Overall, the latest Treasury bills auction in Ghana has shown that the demand for T-bills remains strong, and the Bank of Ghana’s strategy of reducing yields could help to stimulate economic activity and support the country’s economic recovery.
