Ghana’s short-term government securities market (T-Bill) has bounced back from a recent funding shortfall, with investors once again submitting more money than the Treasury sought to borrow.
This comeback was realized despite the continued downward trend in interest rates on the various bills. The latest auction report published by the Bank of Ghana points to a noticeable improvement in investor liquidity after a recent blip in which the government struggled to attract enough bids to meet its target.
According to the report, the government had targeted GH¢2.8 billion at the latest auction, but investors submitted bids totalling GH¢3.7 billion. That means the auction was oversubscribed by GH¢905 million, equivalent to 32.9% above the government’s target.
It marks a sharp reversal from the previous auction, when investor bids fell short of the government’s target by GH¢164 million.
The renewed demand also allowed the government to raise more than it initially set out to borrow. Treasury accepted GH¢2.9 billion, which was GH¢147 million, or 5.3%, above its original target.
However, the government did not accept everything investors offered.
Of the GH¢3,7 billion in total bids, GH¢758 million was rejected, representing 20.73% of all bids submitted. In effect, investors offered about GH¢1.33 for every GH¢1 the government initially wanted to raise, while the Treasury eventually accepted about 79.27% of the money offered.
The figures suggest that the recent weakness in liquidity has not disappeared completely, but the latest auction provides evidence that investor demand for short-term government paper has regained some momentum.
The 91-day bill attracted the largest amount of investor money, accumulating GH¢2.1 billion. The 182-day bill attracted GH¢703 million, while the 364-day bill accumulated GH¢877 million.
This shows that investors continue to place substantial emphasis on short-term instruments, even as the Treasury manages its borrowing requirements across different maturities.
However, stronger demand is not pushing rates higher. The yield on the 91-day bill declined from 4.6941% to 4.6785%. The 182-day bill also fell from 6.4895% to 6.3701%, while the 364-day bill declined from 9.9820% to 9.8339%.
This means the latest auction produced a rare combination of stronger demand and lower borrowing rates.
Ordinarily, heavy demand can give the issuer greater room to push borrowing costs down because investors are competing for a limited amount of securities. The latest figures are consistent with the dynamic that the treasury received significantly more money than it wanted, while yields moved lower across all three maturities.
For the government, every reduction in the rate paid on new domestic borrowing can reduce the interest burden associated with rolling over short-term debt, particularly when the Treasury repeatedly returns to the market to refinance maturing bills.
The latest auction is particularly important because the Treasury not only met its target but raised GH¢146.8600 million more than planned, while borrowing costs continued to decline. This combination gives the government some breathing room in managing its short-term financing needs.
At the same time, the GH¢758 million in rejected bids demonstrates that there was still considerably more investor money available than the Treasury ultimately chose to accept.
