For the third consecutive week, the government has missed its treasury bill (T-Bill) borrowing target despite a relatively moderate target.
This is deepening the sentiments about investor flight after the government enjoyed a boom on the T-Bill market recently.
The latest auction report by the Bank of Ghana reveals that there was another undersubscription, although moderate.
The government intended to borrow a total of GH¢ 4.4 billion. At the end of the auction last Friday, the report revealed that the total bids received amounted to GH¢ 4.1 billion. This represents a moderate undersubscription of 7.6%.
Surprisingly, despite failing to meet its target, a significant portion of the bids submitted was rejected by the government. Out of the GH¢ 4.1 billion bids submitted, the government rejected a total of GH¢ 2.4 billion and only walked away with just GH¢ 1.7 billion.
Compared to the target of about GH¢ 4.4 billion, the government walked away with only about 39% of the amount it intended to borrow.
But on the brighter side for the government, the interest rate for the bills continued to trail downwards, cooling the cost of borrowing on the domestic short-term market for the state.
From 15.7108% in the previous, the interest rate on the 91-day bill trailed downwards to 15.6499%. The yield of the 182-day bill also declined from 16.7330% to 16.5015%, while the 364-day bill also followed suit, marginally declining from 18.8449% to 18.8302%.
It is quite unclear the cause of this massive flight of investors from the short-term market, which a few weeks ago was booming with an excess supply of funds.
Some analysts suspect that the drastic fall in the interest rate on bills could be a disincentive for investors who might want to seek alternative investments.
The fall is a deliberate attempt by the government to reduce its cost of borrowing, a move heavily criticised by the minority that it is a manipulation of the market.
The fear of many economists is that the investors who are demanding less of the T-bill will begin to demand more of foreign currency as a store of value. Such a move will put the stability of the cedi in jeopardy, a sentiment shared by the Governor of the Bank of Ghana, Dr. Johnson Asiama.
To avert such a situation, the MPC, in its last sitting, raised the policy rate by 100bp. However, it is yet to reflect in the T-Bill rate as it continued to decline in the latest auction.
Meanwhile, the government is scheduled to borrow a total of GH¢ 6.7 billion in the next auction. Analysts are keenly watching to find out how things unfold in the next auction.
