Interest rates on treasury bills have dropped after the government decided to return almost GH¢3 billion following an oversubscription of its auction by 45%.
The government aimed to borrow GH¢7.3 billion but received offers totaling GH¢10.5 billion from investors. Instead of accepting the full amount, the government chose to take only an additional GH¢392.7 million, returning GH¢2.9 billion to investors.
According to Fixed Income and Currency Trader Kodzo Letsa, this decision shows that the government is in control of the market, which is currently flooded with cash looking for investment opportunities. By rejecting the excess funds, the government has signaled a careful and disciplined approach to managing the economy, which could increase investor confidence.
As a result of the government’s decision, interest rates on treasury bills have fallen. The 91-day bill rate dropped from 28.41% to 27.98%, and the 182-day bill rate decreased from 28.89% to 28.68%. If such reductions are sustained in subsequent auctions, it would lead to a reduction in lending rates.
Of the total amount accepted by government, 49.3% was 182-day bills and 50.7% was 91-day bills. There was no auction for the one-year note during this period.
The drop in rates is supported by the easing of inflation in January, meaning that the lower rates won’t negatively affect investors’ real returns. Analysts believe the government’s decision not to take all the funds offered, along with other cost-saving measures like President John Mahama’s directive for officials to avoid business class travel, sends a strong message of fiscal discipline.
These actions have boosted investor confidence in the government’s economic management, but consistent efforts will be required to maintain this positive sentiment.
This is the first auction since acting Governor of the Bank of Ghana Dr. Johnson Asiama took office.
