The Treasury bills (T-Bills) market continues to show signs of strain as the government’s short-term borrowing instruments recorded a fourth consecutive undersubscription, despite offering investors higher yields in an attempt to rekindle confidence.
The government targeted GHC6.83 billion in its latest auction but managed to attract only GHC4.51 billion in bids.
According to the latest auction report published by the Bank of Ghana, there was a shortfall of GHC2.32 billion, representing an undersubscription rate of 34%. Of this, nearly all bids (GHC4.50 billion) were accepted, leaving only GHC8.15 million rejected.
The persistent shortfalls, now stretching into a fourth week, underscore the government’s growing struggle to raise sufficient short-term financing even as it gradually raises rates to lure investors back.
The auction results reveal that the 91-day bill, traditionally the most subscribed instrument, accounted for GHC4.51 billion in bids, followed by GHC616 million for the 182-day and GHC279 million for the 364-day bills.
In an effort to attract funds, interest rates on all three maturities rose. The 91-day bill climbed from 10.8158% to 10.9277%, the 182-day moved from 12.4970% to 12.6114%, and the 364-day advanced from 12.9517% to 13.0184%. Yet, the response from investors wasn’t as expected.
This recurring undersubscription points to tightening liquidity conditions in the financial system and waning appetite for government securities, possibly due to competing investment opportunities or investor caution.
The implications could be significant. Persistent shortfalls in Treasury bill auctions mean the government may face challenges funding its short-term spending needs, including critical obligations such as public sector wages, statutory payments, and debt servicing.
To bridge the gap, it may be forced to either tap more expensive borrowing sources or reprioritize expenditures, which could strain the 2025 fiscal outlook.
If the trend continues, the government might have to consider more aggressive yield adjustments or policy coordination with the Bank of Ghana to ease market tightness. Otherwise, the Treasury may find itself in a recurring cash squeeze that could ripple through the wider economy.
Meanwhile, the government plans to raise a more ambitious target of GHC5.7 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.
