Investor confidence has recorded a massive rebound in the state’s short-term instruments as the government has exceeded its treasury bill target immediately after the 2024 Presidential and Parliamentary Elections.
The government planned to borrow GH₵ 6.4 billion the week after the general elections. After the auction by the Bank of Ghana, the government was able to accrue a total of GHC 8.2 billion exceeding the planned target by GHC1.35 billion. This represents 19% in excess of the total target anticipated.
The massive over-subscription came after the four-week streak of under-subscription which was partly attributed to the political uncertainty surrounding the general elections.
Interestingly, the over-subscription of the short-term instruments was recorded at the expense of a hike in interest rate.
The auction results reveal that all bids tendered were accepted. A whopping 82.20% of the total bids accepted came from the 91-day bills which accrued GH₵ 6.74 billion. The 182-Day bills also accrued GH₵ 951.67 million representing 11.60% of the total bids. The 364-day bill managed a paltry GH₵ 508.15 representing 6.25%.
However, the yield on the 91-Day Bill increased from 27.603% to 27.774%. The 182-Day bill also saw an increase from 28.316% from the previous auction to 28.492% while the 364-Day Bill followed the trend rising from 29.905% to 29.943%.
This 19% over-subscription in the post-election week compares to a significant undersubscription during the election’s week leading to a shortfall of 20%.
The first over-subscription of the short-term instruments by investors, analysts explain signifies rebounding investor confidence following a peaceful general election. This means that investors are now abandoning their “wait and see” approach adopted ahead of the elections.
However, while the government is mobilizing enough funds from the short-term market to run the day-to-day affairs of the state, it must also be noted that these funds are coming at the expense of high interest rates indicating a high repayment cost when these bills mature.
The situation could further exacerbate the already huge debt overhang of the country.
Meanwhile, the government has planned to raise GHC5.4 billion this week. Analysts are watching to see whether the investor rebound will continue or otherwise.
