The government’s Treasury bills auction has recorded a fifth consecutive oversubscription, signalling sustained and strong investor appetite for short-term government bills.
However, unlike the previous auctions, where, amid the oversubscription, interest on the bills generally fell, the yield on the latest auction saw an uptick across all bids.
The latest auction report published by the Bank of Ghana reveals that the government set a relatively modest target of GH¢3.31 billion, but investors tendered bids worth GH¢3.92 billion, resulting in an oversubscription of about GH¢611 million, or 18.5 percent.
The government eventually accepted GH¢3.86 billion, rejecting only GH¢60 million, a sign of both strong demand and tight cash management needs.
The scale of the oversubscription is believed to have been partly driven by the lower borrowing target, which made the auction more competitive. Investors, flush with liquidity and still cautious about longer-term risks, appear increasingly comfortable locking funds into short-dated government paper.
As usual, the 91-day bill attracted the bulk of demand, pulling in GH¢2.45 billion, while the 182-day and 364-day instruments recorded GH¢781.43 million and GH¢686.32 million, respectively.
The preference for shorter tenors reflects investors’ desire for flexibility in an environment where rates are still adjusting.
However, the strong demand came at the expense of higher borrowing costs. Interest rates edged up across all instruments. The 91-day bill inched up from 11.0887% to 11.0912%, the 182-day bill jumped more noticeably from 12.4358% to 12.5249%, while the 364-day bill rose from 12.9132% to 12.9407%.
This trend reveals a key trade-off facing the government. While repeated oversubscriptions signal market confidence and ease short-term financing pressures, they are also pushing yields upward, increasing the cost of domestic borrowing.
The fifth straight oversubscription offers short-term relief for government cash flow, helping to smooth spending obligations and refinance maturing debt.
Yet, the steady rise in rates could inflate interest payments over time, squeezing fiscal space if not carefully managed.
It is expected that sustaining investor confidence without driving rates higher will require a delicate balance of anchoring inflation expectations, improving revenue flows, and gradually reducing reliance on short-term borrowing.
Meanwhile, the government plans to raise a slightly higher target of GHC4.0 billion in its upcoming auction this week.
