The government has chalked up a tenth consecutive oversubscription on the Treasury bills market, with investor demand once again overwhelming its borrowing target.
Interestingly, this 10th massive oversubscription was recorded amid a significant drop in interest rates across all tenors, offering welcome relief on borrowing costs.
Last week’s auction report published by the Bank of Ghana reveals that the government aimed to raise somewhere very close to GHS 7.0 billion, but bids poured in to the tune of GHS 17.1 billion, resulting in a whopping 145% oversubscription.
In response, the government accepted GHS 12.3 billion, taking in GHS 5.3 billion more than it originally planned, while rejecting bids worth GHS 4.8 billion.
This marks the tenth week in a row that investor demand has exceeded the government’s target, underlining sustained liquidity in the market and strong appetite for short-term government paper. At the same time, the consistently high acceptance above target points to heavy financing needs, likely driven by maturing Treasury bills and pressing expenditure obligations that continue to weigh on the budget.
Investors’ demand was strong across all instruments. The 91-day bill attracted GHS 5.9 billion of the total bids, the 182-day bill recorded GHS 4.6 billion of the total bids, while the 364-day bill drew GHS 6.5 billion in bids.
The healthy spread of demand suggests investors remain comfortable across the yield curve, even as returns soften.
The most striking development from the auction was on the interest rate front. Yields declined meaningfully across all tenors, easing the cost of borrowing for the government. The 91-day rate fell from 11.1968% to 10.8260%.
The 182-day rate also dropped from 12.6656% to 12.3806%, while the 364-day rate eased from 13.0650% to 12.8235%.
These lower yields reduce interest costs on new borrowing and on rolled-over debt, helping to slow the pace of debt accumulation at a time when financing needs remain elevated.
While declining rates and strong demand signal improved market confidence, the scale and persistence of oversubscriptions highlight the government’s growing reliance on the domestic short-term market to manage cash flow pressures.
As the government records its 10th straight oversubscription, the challenge ahead will be to balance this strong investor appetite with prudent borrowing, ensuring that today’s cheaper financing does not translate into heavier debt burdens tomorrow.
Meanwhile, the government plans to raise a less ambitious target of GHC5.0 billion in its upcoming auction this week.
