After briefly regaining investor confidence weeks ago, the government’s short-term debt market (T-Bills) has again slipped, recording its second consecutive undersubscription.
The government’s latest T-bill auction attracted bids far short of its target despite a marginal drop in yields.
The latest auction report published by the Bank of Ghana (BoG) reveals that the government sought to raise GHC6.82 billion. However, it received only GHC4.76 billion, representing an undersubscription of about GHC2.06 billion, a shortfall of 30.25%.
This marks yet another weak outing after a similar shortfall in the previous auction, underscoring investor caution despite policy efforts to stabilize the market.
The report reveals that the 91-day bill drew the largest bids at GHC3.49 billion, followed by GHC785.31 million for the 182-day and GHC487.59 million for the 364-day bill. However, investor appetite waned even as rates on two of the maturities, 91-day and 364-day, declined slightly, signaling limited enthusiasm for short-term government paper at lower yields.
The 91-day bill rate fell from 10.6976% to 10.6747%, while the 364-day slipped from 12.9224% to 12.877%. Only the 182-day bill saw a marginal uptick in yield, from 12.4385% to 12.4693%, suggesting investors demanded slightly higher returns for mid-term maturities amid market uncertainty.
In a rare move, the government accepted all bids submitted without any rejection for the first time in several weeks. This signals a dire need for liquidity to meet short-term obligations, even at the expense of cost optimization.
Market watchers also note that the Bank of Ghana’s open market operations during the same week may have contributed to the low investor demand for Treasury bills. The central bank sold BoG bills at higher interest rates than the government’s T-bills, diverting investor attention toward the more lucrative alternative. This competition likely compounded the government’s struggle to attract sufficient bids despite favorable policy narratives and relatively stable macroeconomic indicators.
The consecutive undersubscriptions suggest that investor confidence in government securities remains fragile, constrained by tightening liquidity and competing instruments offering better yields. Unless yields rise to more attractive levels or the BoG recalibrates its market operations, the Treasury market may continue to face subdued participation in the coming weeks.
Meanwhile, the government plans to raise a more ambitious target of GHC5.3 billion in its upcoming auction this week. Will there be a rebound, or will the nosedive continue?
Market watchers are closely monitoring the market to see if the shortfall could be reversed.
