T-Bill rate reduction bites as auction undersubscribed by GHS 766m
Government’s recent T-Bills auction failed to meet its target of GHS 3,206m, with an undersubscription of GHS 766m. This marks a significant deviation from the weeks of oversubscription of T-Bills that followed the exclusion of short term debt instruments from the domestic debt exchange program. The total bids tendered for the short term debt instruments by primary dealers amounted to GHS 2,440m, falling short of the target.
Bids tendered for the individual short term debt instruments showed that the 91-day treasury was the most subscribed, with bids totaling GHS 1,419m. The 182-day treasury received GHS 553m, while the 364-day treasury received GHS 468m. Despite the undersubscription, the government accepted all the bids tendered for the short term debt securities.
The short term debt instruments were issued at varying interest rates, with the 91-day treasury being issued at 17%, the 182-day treasury at 19%, and the 364-day treasury at 21%. These interest rates were relatively high, which may have contributed to the undersubscription.
The undersubscription of T-Bills by the Ghanaian government highlights the possible decrease in demand for short term debt securities. This could be attributed to a variety of factors, including the high-interest rates offered by the government. Additionally, the exclusion of short term debt instruments from the domestic debt exchange program may have had an impact on demand.
This undersubscription comes at a time when the Ghanaian economy is recovering from the COVID-19 pandemic’s impact, which had a severe effect on the country’s fiscal position. The government has been implementing measures to shore up its finances, including the issuance of T-Bills to fund its operations. This undersubscription could lead to the government considering alternative measures to finance its operations.
The undersubscription of the T-Bills auction also underscores the need for the government to review its debt management strategy, including the pricing of debt securities. It may be necessary to lower interest rates on short term debt instruments to stimulate demand and ensure that the government meets its financing needs.
Overall, the undersubscription of T-Bills by the Ghanaian government highlights the challenges faced by emerging market economies in financing their operations, especially in the wake of the COVID-19 pandemic. The government must adopt a proactive approach to debt management and explore alternative financing options to ensure its long-term fiscal sustainability.
