In a very decisive move, the government has rejected an amount of GH¢2.9 billion worth of investor offers in its latest Treasury Bill auction.
The latest auction report published by the Bank of Ghana reveals that the government planned to borrow GH¢7.3 billion but received bids totaling GH¢10.5 billion from investors.
Instead of accepting the total bids worth GH¢10.5, the new government chose to add only an additional GH¢392.7 million to its target. In total, an amount of GH¢ 7.65 billion was accepted as the government returned GH¢2.9 billion to investors.
Reacting to the action by the government, Fixed Income, and Currency Trader, Kodzo Letsa explained to The High Street Journal that the action of the government in rejecting close to GH¢ 3 billion offers is in response to what he describes as “investor greed.”
He explained that some investors demanded a higher interest rate on their offers which went beyond the agreed and acceptable range for the auction.
“Some investors were greedy and wanted yields above what was proposed in the pricing guidance and this led to the government rejecting these “expensive” funds,” Kodzo Letsa told The High Street Journal.
The actions of the government, some analysts find very laudable. By rejecting the offers with higher interest rates making the bids expensive, the government has re-enforced its commitment to managing borrowing costs amid high interest rates.
The rejection of the higher sets a good tone for interest rates which are currently higher than the policy rate to potentially drop going forward. Accepting the higher-interest bids could have set a precedent that will force the government to pay even higher yields going into the future.
In addition, the move also signals a strict adherence to pricing guidance by the government discouraging speculative behaviors that could potentially drive higher interest.
It is anticipated that the investors in the next auction, based on the government’s action will offer a moderate yield rate which could help slow the upward pressure on T-bill rates.
Market watchers and analysts will be closely monitoring the upcoming auction this week to see if investors adjust their pricing expectations or if the government will need to increase yields to meet borrowing needs.
