Ghana’s Treasury market staged a dramatic comeback last week, breaking a six-week streak of weak demand to record a 110% oversubscription.
But it must be added that this oversubscription was driven mainly by a softer target and renewed investor appetite for short-term government paper.
After weeks of Treasury auctions missing their mark, the latest results show a sharp reversal.
In the latest auction report published by the Bank of Ghana (BoG), the government sought only a meagre GH¢2.86 billion, but investors poured in a whopping GH¢6.03 billion, with GH¢5.78 billion accepted, leaving GH¢251.75 million rejected.
This represents an oversubscription rate of 110%.
For six straight auctions, the market had signalled waning confidence, with persistent undersubscriptions despite rising yields. This week’s outcome, therefore, comes as a welcome relief for a government racing to meet short-term financing needs.
Market watchers, however, note that the relatively low borrowing target may have contributed significantly to the sudden surge. With government demand much lower than usual, investors had room to crowd in heavily, producing the impressive oversubscription numbers.
The latest auction showed shifting investor sentiment across maturities.
The 91-day bill accumulated GH¢2.57 billion in bids as its rate dipped from 11.1353% to 11.0501%
The 182-day bill, also accumulating a total of GH¢1.65 billion in bids, saw its yield rate drop from 12.6805% to 12.4302%
On the contrary, the 364-day bill, which recorded GH¢1.81 billion in bids, is the only tenor with a slight rate increase, from 13.0618% to 13.0862%
The softer yields on the shorter tenors suggest investors may be comfortable locking in at slightly lower returns, possibly anticipating stabilising inflation or fewer alternative high-yield instruments in the week.
The sheer volume of bids raises questions about whether the market is seeing a genuine return of confidence or simply reacting to a more manageable target. Analysts argue that a smaller target can often create the illusion of strong demand, especially during periods of tight liquidity.
However, the strong participation across all three maturities indicates a broader pickup in appetite that may point to improving sentiment, or a temporary shift influenced by market conditions.
This significant oversubscription offers the government short-term breathing space in its fiscal operations. At least, in the short term, there is improved liquidity to meet near-term obligations such as wage payments and maturing securities.
While this auction marks a positive break from the string of undersubscriptions, analysts caution that one successful week does not signify a permanent recovery.
Meanwhile, the government plans to raise a more ambitious target of GHC5.8 billion in its upcoming auction this week.
