The consistent drop in the treasury bill yields is driving a quiet but significant shift across Ghana’s financial markets.
Investors are currently moving from the treasury bill market to the stock market.
It is emerging that the same strong liquidity that has enabled the Government of Ghana to drive down short-term borrowing costs is now pushing many investors to rethink where they park their money.
With the 91-day bill hovering around single digits and longer tenors also easing, returns that once looked attractive are no longer compelling for fund managers, high-net-worth individuals, and even institutional investors.
According to research analyst John Nani of Fincap Securities Limited, as the government continues to reject a chunk of the investor bids for T-bills, they are finding solace in the equity market.
This means that all the excess cash does not disappear; it searches for alternatives. And increasingly, that alternative is the stock market.
Liquidity Finds a New Home
Data shared by John Nani indicates that the recent trading activity on the Ghana Stock Exchange (GSE) confirms the move. He reveals that last week alone, roughly 59 million shares were traded, which is about 78% higher than the volume recorded the previous week.
That surge is not accidental. It reflects liquidity rotating out of fixed-income securities into equities in pursuit of stronger returns.
“It is evident that a lot of the liquidity on the market is also moving into the equity market, as has been the case over the past few months. There’s been a lot of bids on the equity market, a lot of investors are looking elsewhere to place their money. Dropping rates is good news for the government who is the biggest borrower, but investors on the other side are also looking for the best rates,” the analysts explained in an interview.
For years, Treasury bills have offered relatively high, risk-free returns, making them the preferred destination for cautious investors. But with inflation declining significantly and T-bill rates falling in tandem, real returns are narrowing.
Investors who once comfortably rolled over short-term government paper are now being forced to consider higher-risk, higher-return assets.
From Safety to Strategy
Experts explain that the shift of investors from government bills to equities is strategic. When short-term government instruments yield less, equities begin to look more attractive, especially dividend-paying blue-chip stocks.
If a listed company offers dividend yields that outperform T-bills, portfolio managers take notice.
Lower T-bill rates also reduce the discount rate used to value stocks, which can lift equity prices. In practical terms, cheaper money often supports stronger stock valuations.
The motivation of investors is that if a 91-day T-bill no longer delivers double-digit returns, why lock funds there when selected equities may provide capital gains plus dividends?
Government Gains, Investors Adjust
There is no doubt that falling yields are positive news for the government. As the largest borrower in the domestic market, it can refinance maturing obligations at significantly lower cost, easing fiscal pressure.
But on the other side of the trade, investors must adapt. Pension funds, asset managers, and individual savers still need to meet return targets. With government paper offering less, capital naturally migrates.
Market observers note that stronger bid activity and rising volumes on the GSE in recent weeks suggest growing investor appetite. The equity market, once overshadowed by high-yielding T-bills, is regaining attention.
The Impact
A more active stock market improves liquidity, enhances price discovery, and can make it easier for companies to raise capital. If sustained, the trend could support corporate expansion and private-sector growth.
However, analysts caution that equities carry volatility. Unlike Treasury bills, stock prices fluctuate daily. Investors shifting into equities must balance opportunity with risk.
The strong liquidity may have handed the government the upper hand in the Treasury bill market, but that same liquidity is now reshaping Ghana’s investment landscape.
