Things are taking a different turn in Ghana’s short-term instruments market (T-Bill) as the first undersubscription has been recorded under the new government.
Since the new administration came into office, the T-bills have mostly been oversubscribed forcing the government to reject many bids on a weekly basis.
The latest auction results from the Bank of Ghana reveal that the government planned to borrow a total amount of GH¢ 6.14 billion. However, at the end of the auction, total bids received from investors amounted to only GH¢ 4.7 billion leading to a shortfall of GH¢ 1.4 billion representing an undersubscription of 23%.
Even from the total bid of GH¢ 4.7 billion, the government only accepted an amount of GH¢ 3.3 billion despite the target of GH¢ 6.14 billion. This implies that the government missed its target by about GH¢2.8 billion marking a shortfall of 46%.
It is quite unclear why the government rejected some of the bids although it failed to meet its target.
The interest rate on the instruments for another consecutive week recorded a decline making the bills unattractive to investors. For instance, the rate on the 91-day bill declined from 15.8624% to 15.7353%. The rate on the 182-day bills also recorded a marginal decline from 16.9287% to 16.9265% while that of the 364-bill also saw a decline from 18.9653% to 18.8496%.
Possibly, it could be deduced that the consistent fall in interest might have started driving away investors who may want to find other alternatives that offer better returns.
This comes as a two-edged sword for the government. On the good side, the reduction in the rate means a reduced cost of borrowing, and the reduced demand for the bills might result in the diversion of the funds to the private sector to support real economic growth.
However, with the suspension of the bonds market due to the Domestic Debt Exchange Program (DDEP), the T-bill market remains the option for the government to borrow hence the mass flight of funds from the market might risk the government’s ability to raise funds to run the administration.
Meanwhile, the government has announced plans to raise GH¢5.6 billion in the next auction. With the sudden turn of events, analysts and economists will be very keen about the next development since it could paint a better picture of investor sentiments.
