T-Bill: Gov’t beats auction target but at a costly average rate of 24.3%
The Government has demonstrated its ability to attract investor interest by surpassing its target in the recent treasury bill auction held on Friday, June 9, 2023. Despite achieving this feat, the government had to contend with high average interest rates, highlighting the cost associated with raising funds through the auction.
The government is, however, preparing to raise additional funds in the coming week to finance short-term expenditures.
Successful Auction and Higher-than-Expected Amount
The government’s initial target for the treasury bill auction was GHS 2.63 billion. However, the auction proved to be highly successful, as the government managed to raise a total of GHS 2.79 billion, exceeding the target by GHS 168 million. This outcome reflects strong investor demand for Ghanaian government securities, indicating confidence in the country’s economic prospects.
Interest Rates and Acceptance of Bids
Despite the success in surpassing the auction target, the government faced the challenge of high interest rates. The average interest rate cost for the auction stood at 24.3%, signaling the government’s need to offer competitive rates to attract investors. The interest rates for the specific treasury bill maturities were as follows: the 91-day bill was issued at 21.2%, the 182-day bill at 23.9%, and the 364-day bill at 27.8%.
The government accepted all bids received for each maturity, underlining the willingness to accommodate investor demand and ensure successful debt issuances.
Future Plans for Debt Issuance
Looking ahead, the Government aims to raise an additional GHS 3.79 billion on the domestic debt market in the coming week. These funds will be utilized to finance short-term liabilities, highlighting the government’s commitment to managing its financial obligations effectively.
It is important to note that raising significant amounts of debt in a short period may put upward pressure on interest rates and pose challenges for debt management. Therefore, the government will need to carefully evaluate market conditions and implement strategies to ensure favorable borrowing terms.
As the government plans to raise additional funds in the coming week to address short-term liabilities, it must balance its borrowing needs with market conditions to maintain sustainable debt management. Monitoring interest rate movements and implementing appropriate debt management strategies will be crucial in achieving favorable borrowing terms and securing the necessary funding for the government’s financial obligations.
