The government’s treasury bills market has chalked up its seventh consecutive oversubscription, reinforcing strong investor confidence, although borrowing costs continue to climb.
The latest auction report published by the Bank of Ghana for last week reveals that the government set a bold target of GH¢7.56 billion, a notable step up from previous weeks.
At the end of the auction, investors not only met that ambition but exceeded it, submitting bids worth GH¢9.11 billion, resulting in an oversubscription of about 20.4 percent.
The government eventually accepted GH¢9.08 billion, taking in roughly GH¢1.52 billion more than it originally planned, while rejecting just GH¢25 million.
The auction results suggest that investors remain eager to lend to the government, even at higher volumes. Demand was strongest at the short end of the market, with the 91-day bill attracting GH¢6.54 billion in bids.
The 182-day bill recorded GH¢1.15 billion, while the 364-day bill drew GH¢1.50 billion, reflecting broad-based appetite across tenors.
The ability to meet such an ambitious target, after six straight oversubscriptions, sends a strong signal that confidence in government paper remains intact.
However, this confidence is not coming cheap. Interest rates continued their upward march on most instruments. The 91-day rate rose to 11.1706% from 11.1169%, while the 182-day rate climbed to 12.6154% from 12.5506%. Only the 364-day bill offered some relief, easing slightly to 12.9021% from 12.9320%.
As expected, for investors, higher rates sweeten returns. However, for the government, they mean costlier short-term borrowing, even as access to funding improves.
The strong inflows provide immediate breathing space for the government’s cash flow, helping to refinance maturing debts and support day-to-day operations without disruption. Consistently oversubscribed auctions also reduce refinancing risk, as the government is less likely to struggle to roll over obligations.
Yet, the persistent rise in rates raises longer-term concerns. Higher interest costs can gradually crowd out spending on development priorities if not carefully managed, especially in a tight fiscal environment.
The challenge now is balancing strong demand with sustainable borrowing costs, ensuring that today’s confidence does not become tomorrow’s fiscal strain.
Meanwhile, the government plans to raise another ambitious target of GHC7.15 billion in its upcoming auction this week.
