Ghana: Investors demand 2,669bps premium over US treasury rates to hold country’s bonds
Investors in the international debt market are requesting for increased premiums to be able to hold Ghana’s foreign bonds.
The increased premium demand by investors is to compensate for the high credit and default risks of buying or holding Ghana’s foreign bonds.
According to a recent reportage by bloomberg on the country’s bonds performance sighted by norvanreports, premium demand by investors has widened by some 2,669 basis points (26.69%) over US treasury rates.
A search by norvanreports reveals that US treasury rate for a 2 year bond for instance, currently stands at 4.25%.
Hence for an issued 2 year foreign bond by Ghana, investors are demanding for 30.94% premium or interest to hold the bonds.
US Treasury Yields
| NAME | COUPON | PRICE | YIELD | 1 MONTH | 1 YEAR | TIME (EDT) |
|---|---|---|---|---|---|---|
| GB3:GOV3 Month | 0.00 | 3.63 | 3.82% | +73 | +382 | 11:56 PM |
| GB6:GOV6 Month | 0.00 | 4.16 | 4.25% | +52 | +427 | 11:56 PM |
| GB12:GOV12 Month | 0.00 | 4.26 | 4.45% | +51 | +437 | 11:55 PM |
| GT2:GOV2 Year | 4.25 | 99.66 | 4.43% | +57 | +404 | 11:56 PM |
| GT5:GOV5 Year | 4.13 | 99.63 | 4.21% | +58 | +309 | 11:56 PM |
| GT10:GOV10 Year | 2.75 | 90.02 | 3.99% | +54 | +242 | 11:56 PM |
| GT30:GOV30 Year | 3.00 | 82.61 | 4.00% | +49 | +197 | 11:56 PM |
For domestic debt, holdings by foreign investors in outstanding domestic government and corporate bonds fell to 12.3% at the end of August, the lowest ever, from a 2022 peak of 17.3% in April due to the multiple downgrades from credit rating agencies on the back of the adverse economic challenges facing the economy.
According to bloomberg, Ghana’s domestic bonds are trading at an average yield of 41.9%, the highest in emerging markets.
Meanwhile, Ghana’s cedi slumped on Monday to become the world’s worst-performing currency this year as investors continued to squeeze foreign capital to the West African country before a deal with the International Monetary Fund (IMF).
The currency of the world’s second-biggest cocoa producer depreciated as much as 3.3%, before paring the loss to 11.2750/$ in the capital, Accra. That took its losses this year to more than 45%, the most among 148 currencies tracked by Bloomberg.
The cedi’s slide has accelerated in the past month as Ghana began formal negotiations with the IMF for an extended credit facility. The country is hoping to receive up to $3bn in loans over three years under the arrangement to spur its finances and support the balance of payments.
