Keen watchers of the developments on Ghana’s short-term market (T-Bills market) have noticed that there is a dramatic shift in the demand for 364-day bill, raising questions about what is happening.
This shift in the demand for the short-term bills is not a mere accident but an important signal about Ghana’s economy, according to some analysts.
In the last two government auctions, demand for the 364-day bill surged to levels rarely seen, signaling a change in how investors are positioning their money.
According to financial analyst Mac-Jordan Nartey, the numbers are not a mere fluke. For instance, in the most recent auction alone, investors put in bids of about GHS7 billion for the 364-day bill, which was even close to the entire target of the government. The government, however, accepted roughly GHS5 billion and rejected close to GHS2 billion.
As market watchers have confirmed, this kind of demand, especially for a one-year bill, is unusual in a market that has traditionally been dominated by short-term instruments like the 91-day and 182-day bills.
So what is driving this change? At the heart of it, MacJordan Nartey explains, is growing confidence in the economy. He notes that this is a signal of improving macroeconomic conditions. He explains that investors now feel more comfortable locking their money away for longer periods.
When the economy looks shaky, investors prefer to keep their money flexible. But when things begin to stabilize, they are more willing to commit for a year rather than just three or six months.
This improving outlook is slowly reshaping investor behavior. Investors are increasingly signaling that they believe the worst risks are easing, and that holding a longer-dated government security is no longer as risky as it once seemed.
“We saw the high investor demand in the 364-day bill repeat a trend in last week’s money markets auction. Investor demand for the 364-day bill came in at around $7 billion, and the government rejected something around $2 billion to accept about $5 billion of that demand,” the analyst said in an interview monitored by The High Street Journal.
He further continued, “Now, what is influencing that trend? It’s about the fact that gradually we’re seeing macroeconomic fundamentals improve, and as such, you would expect investors to allocate investment to quite a longer-dated security. So, we are gradually seeing a large shift in the treasury bill markets as well. So, largely, that’s influencing it.”
The development, according to the analyst, reflects more than just a search for yield. MacJordan Nartey says it shows rising confidence, changing expectations, and a treasury bill market that is gradually adjusting to a more stable economic environment.
Investors, due to an improving macroeconomic environment, are beginning to think longer term, and the 364-day bill is becoming their instrument of choice.
Is this a signal that the investors are ready for the return of the bond market, which is a longer-term investment than the T-Bills? The country’s bond market has been inactive after the domestic debt exchange programme. Meanwhile, President Mahama had earlier signaled that his government is not in a rush to return to the long-term debt market.
