Oversubscription of T-Bills hits GHS 12.3bn high
Ghana’s short-term Treasury bills continue to attract strong investor demand in the primary market, with oversubscription reaching an impressive GH¢12.39 billion. Limited investment options and attractive yields on the Treasury bills are cited as the main reasons for the high demand. This oversubscription is particularly noteworthy given that investors tendered bills totaling GH¢47.3 billion, which is approximately 33% higher than the target of GH¢34.91 billion. Consequently, marginal bids were rejected, and GH¢44.19 billion was sold across the 91-day, 182-day and 364-day tenors.
This strong investor demand is expected to help the Ghanaian Treasury build buffers, with GH¢30.55 billion being used to refinance matured debt during the period. This indicates a maturity cover of 1.55x, which could help to reduce Ghana’s debt burden.
Despite the government’s attempts to reduce borrowing costs through the compression of yields on short-term maturities, yields on Treasury bills continue to increase, albeit at a slower pace. At the last auction, the 91-day bill increased by 9 basis points (bps) to 19.95%, while the 182-day bill rose by 13bps to 22.71%. This rise in yields suggests that the market is signaling a preference for higher yields, which could have implications for future debt issuances by the Ghanaian government.
The coupon rate on the 91-day, 182-day and 364-day T-bills decreased significantly at the end of Q1, as the government attempted to reduce its borrowing costs. However, despite these efforts, the decline in yields across the short-term market has halted amid tightening liquidity efforts by the Bank of Ghana. These efforts include an increase in the policy rate by 150 bps to 29.5% and an increase in the cash reserve requirement to 14%. These measures are aimed at curbing inflation and maintaining macroeconomic stability, but they could also limit the government’s ability to reduce borrowing costs.
In the secondary market, trading activity slumped by 68.05% to GH¢117.11 million. New bonds accounted for 56% of the total volume, while old bonds accounted for 44%. The most actively traded new paper was August-2028, settling at 11.44%, while February-2037 was actively traded and cleared at 10.81%. Investors’ trading preference for old bonds skewed toward the short- to medium-term papers, with November-2026 accumulating 83.46% of the total traded volumes and priced at 35.07%.
Looking ahead, a further upward re-pricing in money market yields is anticipated to sustain current levels of demand in the primary market. The next auction is scheduled for Friday, May 5th, 2023, with an issuance target of GH¢1.83 billion across the 91-to-364-day bills to refinance GH¢1.75 billion of maturing face value due next week. Despite the potential challenges posed by tightening liquidity measures, Ghana’s Treasury bills remain an attractive investment option for investors seeking high yields in a low-interest-rate environment.
