Gov’t Misses T-Bill Target by ¢1.7Bn After Three Weeks of Oversubscription, But Rates Continue to Fall

The Treasury bills market (T-Bills) has suffered a setback as the government failed to meet its target in the last auction.

This undersubscription comes after the government enjoyed three consecutive weeks of oversubscription amid falling interest rates.

In the latest auction, investors held back as the government suffered a shortfall of about 20%.

The latest auction report published by the Bank of Ghana reveals that the government planned to borrow a total of GH¢ 8.6 billion. However, at the end of the auction, total bids submitted by investors amounted to a total of GH¢ 6.9 billion. This resulted in a shortfall of GH¢1.7 billion, representing an undersubscription of 20%.

In all, the 91-Day bill accumulated GH¢5.03 billion of the total bids submitted. The 182-Day bill also gathered GH¢1.4 billion of the total bids, while the 364-Day bill also accumulated just GH¢490 million of the bids.

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Despite failing to meet its target, not all bids submitted were accepted by the government. Out of the GH¢6.9 billion submitted, the government rejected a total of GH¢ 202 million, walking away with just GH¢6.7 billion.

On the interest on the bills front, there was another reduction.

The interest rate of the 91-Day Bill declined significantly from 10.2949% to 10.2009%, while that of the 182-Day Bill also recorded a drop from 12.3594% to 12.2540%. The 364-Day bill also saw a decline from 13.2465% to 13.1022%.

Considering the consistent drop in the interest rate, it is highly likely that the target of the government to push the rate to a single digit will be achieved.

This will enable the government to borrow at cheaper cost to fund its recurring expenditure without rapidly ballooning its public debt.

In the meantime, the government plans to raise a less ambitious amount of GH¢4.2 billion in its upcoming auction this week. Will the slow demand last week continue this week, or will there be a rebound?

Market watchers are closely monitoring the market to see if there will be a rebound or the moderate investor flight will continue.