For the third week running, the government has failed to meet its T-Bills target, further deepening the uncertainty of investor confidence in the state’s short-term instruments.
The government, last week, encountered another shortfall in its T-Bills target, making it the third consecutive undersubscription. Three weeks ago, the target was missed by a whopping GH¢ 1.03 billion. Same was repeated two weeks ago, although marginally at GH¢ 169.64 million. The streak continued last week as the government missed the target by GH¢ 1.3 billion.
Last week’s auction report published by the Bank of Ghana reveals that the state planned to borrow a total amount of GH¢ 6.7 billion on the T-Bills market. However, bids totalling GH¢ 5.4 billion were tendered, leading to a shortfall of GH¢ 1.3 billion. This represents an undersubscription of 19.4%.
Interestingly, despite failing to meet its targets, the government rejected a significant portion of the bids tendered by investors.
From the GH¢5.4 billion bids tendered, GH¢ 2.6 billion were rejected as the government walked away with just GH¢ 2.8 billion despite the target to borrow GH¢ 6.7 billion.
The downward trend of the yield curve continued as the interest rates on all bids maintained momentum with its down trajectory.
From the auction report, the yield on the 91-day bill declined from 15.1610% to 15.1087%. The 182-day bill also declined from 15.7049% to 15.6810&, while the rate on the 364-day also fell to 16.7872% from 16.8018%.
The development on the T-bills market is in line with the government’s agenda to ensure fiscal discipline by bringing borrowing under control and also reduce the cost of borrowing through the reduction in the interest rate on the bills.
However, unfavourable investor sentiments linger as the bills have been undersubscribed for the third consecutive time. It is, however, unclear if investors are abandoning the short-term instruments for alternative investments.
In the meantime, the government plans to raise GH¢ 5.5 billion in its upcoming auction. Market watchers are closely monitoring the market to see if there will be a rebound or the back-to-back nosedive will be replicated in this week’s auction.
