T-Bills: Auction results show significant drop in interest rates to 19%
The Bank of Ghana has reported a significant drop in interest rates on short-term securities, following the government’s decision to reject bids with higher yields. According to the latest auction results, the 91-day yield fell by 16%, dropping from 24.16% to 19.04%, while the 182-day bill saw a decrease of about 13%, going for 22.84%. The 364-day bill also saw a drop of approximately 9% to 26.82% on Friday, March 10, 2023.
This is a remarkable shift in the yield curve, considering that interest rates had reached a high of 35% a week ago. This fall in yields is expected to result in significant cost savings for the government, which recently saved about ¢220 million from the reduction in T-bills yields.
Market analysts and watchers anticipate that this trend will continue in the coming weeks, and interest rates are expected to continue to fall. This development has implications for investors who may need to reassess their investment strategies as the yield curve evolves.
The government, on its part, has secured ¢4.20 billion from the sale of T-bills, representing an oversubscription of 74%. However, the government only accepted ¢3.31 billion of the total bids. Of this amount, ¢1.99 billion came from the 91-day T-bill, while the bids for the 182-day T-bill were estimated at ¢1.16 billion. The government accepted ¢1.43 billion and ¢924 million for the 3-months and 6-months bills, respectively. For the 364-day bill, the government secured ¢1.05 billion, with the government accepting ¢959 million of the total bids.
This development could have broader implications for the Ghanaian economy, as a reduction in interest rates could boost lending and stimulate economic activity. It could also have implications for inflation, as lower interest rates could result in increased consumer spending, leading to higher inflation rates. As such, policymakers will need to keep a close eye on inflation and other macroeconomic indicators as they monitor the effects of the fall in yields.
Overall, the fall in yields is a positive development for the Ghanaian economy, as it could reduce the cost of borrowing and stimulate growth. However, investors and policymakers will need to closely monitor the yield curve and other macroeconomic indicators to identify any potential risks or opportunities that may arise.
