Thin trading persists on fixed income market over DDE
Ghana’s Fixed Income Market (GFIM) is experiencing low liquidity due to ongoing uncertainty surrounding the Domestic Debt Exchange Programme (DDEP).
Despite the government’s conclusion of the DDEP, the participation target of 80% has yet to be met, with individual investors reportedly resisting.
As a result, last week’s trading volumes fell by 12% to GH₵932 million ($168 million), with a total of 139 million Government of Ghana notes and bonds, as well as corporate bonds being traded.
In January 2023, the GFIM’s total volume traded declined further to GH₵8.83 billion ($1.58 billion), a 39.86% decrease compared to January 2022.
According to market analyst Apakan Securities, the 3-year and 6-year bonds were the most actively traded, with the Jan-2025 bond at a 21% coupon rate and the Oct-2024 bond at a 21% coupon rate being priced at 55% and 53%, respectively.
Market watcher Fincap Securities noted that the front end of the yield curve saw more action, as risk-tolerant investors showed an appetite for short-dated papers.
The Treasury-bills, which have been exempt from the DDEP, remain the most popular government debt instrument, accounting for 62.09% of the market share.
In December 2022, the government invited all bondholders to exchange their bonds for new bonds with compatible terms as part of its efforts to reach the required debt sustainability threshold of a debt-to-GDP ratio of 55%.
However, concerns arose among bondholders, leading to a recalibration of the DDEP’s framework.
Three categories of bondholders were established, with each having different terms and conditions.
The Treasury exceeded its GH₵1.42 billion ($257 million) fundraising target at last week’s auction, raising GH₵1.95 billion ($351 million). This week’s target is set at GH₵2.76 billion ($498 million).
The government hopes that the recent agreement with key stakeholders and the enhancement of the DDEP will encourage the full participation of institutional investors and the mobilization of qualified investors, ensuring the success of the debt exchange operation.
