Investor appetite for short-term government securities continues to cool as Ghana’s Treasury-bill (T-bill) auction recorded its third straight week of undersubscription, despite higher yields designed to lure buyers.
According to the Bank of Ghana’s latest T-Bill auction report, the government targeted GHS 5.3 billion last week but managed to raise only GHS 4.6 billion, representing a 13% shortfall.
The government, however, accepted all bids submitted, which indicates a clear signal of its pressing need for funds to meet expenditure obligations and settle maturing debts.
The 91-day bill attracted the bulk of investor interest, accounting for GHS 3.7 billion in bids. The 182-day and 364-day bills followed with GHS 567 million and GHS 309 million, respectively.
Yet, even with investors demanding higher returns, overall subscriptions fell short of the target, which is a worrying trend that hints at tightening liquidity in the financial system.
To entice participation, the government raised yields across all maturities. The 91-day bill rate rose from 10.6747% to 10.8158%, the 182-day bill from 12.4693% to 12.4970%, and the 364-day bill from 12.8770% to 12.9517%.
It is possible that the modest rate hikes have not been enough to offset investor caution. Many fund managers and banks, they argue, are grappling with competing liquidity demands and growing uncertainty about the government’s short-term borrowing strategy amid efforts to stabilise the cedi and control inflation.
For the government, the persistent shortfall could complicate cash flow management in the coming weeks. With maturing debts to roll over and expenditure commitments piling up, authorities may have to either increase rates further or lean on other funding sources such as domestic bonds or short-term advances from the central bank.
Meanwhile, the government plans to raise a more ambitious target of GHC6.8 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.
