Government has registered a modest rebound in the Treasury bills (T-bills) market, recording its first oversubscription after three consecutive weeks of undersubscription that had sparked concerns over waning investor confidence.
Although the oversubscription was marginal, it marks a potential turnaround for the short-term debt market, which had recently shown signs of fatigue following a period of strong performance.
The latest auction report published by the Bank of Ghana reveals that the government planned to borrow a total of GH¢ 6.67 billion. At the end of the auction last Friday, total bids tendered by investors amounted to a total of GH¢ 6.9 billion. This amounted to an excess or an oversubscription of GH¢ 187.91 million, representing 2.81%.
However, the government only accepted an additional GH¢ 121.7 million from the excess bids, rejecting a total of GH¢ 66.21 million.
In total, despite the target of GH¢ 6.6.7 billion, the government walked away with GH¢ 67.4 billion after the auction.
Amid the mild investor rebound, the interest rate on the bills continued with its declining trajectory on the yield curve, making the cost of borrowing for the government less and less costly.
Per the auction report, the interest on the 91-day bill declined from 15.6499% to 15.4527%. The rate on the 182-day bill further trailed down from 16.5015% to 16.2149%. The 364-day bill also saw a reduction from 18.8302% to 18.6507%.
The continuous decline aligns with the government’s agenda to significantly reduce the rate on the bills to make borrowing cheaper. Sources within the government tell The High Street Journal that it is the vision of the administration to ensure that rate declines further to hit a single digit.
However, the rate of decline has sent shivers down the spine of the Bank of Ghana. The Central Bank fears development might put pressure on the cedi as the lower rates on the bills might force investors to rather invest in foreign currency, hence demanding more forex and jeopardizing the local currency.
Some analysts have also shared in the sentiment of the Bank of Ghana and, hence, find the latest MPC decision to hike the policy rate welcoming. This is seen as the countermeasure to the rate of decline in the T-bills.
It is also unclear whether the quick turnaround on the short-term market after three consecutive streaks of low performance will continue or become a “nine-day wonder.”
Meanwhile, the government is scheduled to borrow a total of GH¢ 6.6 billion in the next auction. Analysts are keenly watching to find out how things unfold in the next auction.
