There was a significant rebound on the government’s short-term market (T-bills) last week following weeks of slump.
The government in the previous weeks has either been recording massive undersubscriptions or very moderate oversubscriptions, raising concerns about investor confidence.
The latest auction report by the Bank of Ghana last week reveals that the government’s target was significantly oversubscribed. The government planned to borrow a total of GH¢ 6.1 billion. After the auction, a total of GH¢7.3 billion bids were received, representing an oversubscription of 18.2%.
With the GH¢1.12 billion oversubscription, the government only accepted an additional GH¢550 million, accepting a total of GH¢6.7 billion, rejecting GH¢570 million.
The performance on the market last week reinforces analysts’ view that investor confidence is fluctuating.
The downward trend of the interest rate on the bids also continued last week.
From the auction report, the yield on the 91-day bill declined from 15.4522% to 15.3209%. The 182-day bill also declined from 16.1836% to 16.0380% while the rate on the 364-day also fell to 18.3705% from 18.6206%.
The steady decline in interest rates on government treasury bills is in line with the administration’s broader goal of making borrowing more affordable.
Sources close to government discussions tell The High Street Journal that the ultimate ambition is to bring T-bill rates down to single digits.
However, the Bank of Ghana has expressed concerns about the potential downside of this trend. Central Bank officials warn that if rates continue to fall, investors may increasingly turn to foreign currency assets in search of better returns. This shift could fuel higher demand for forex, putting renewed pressure on the cedi and threatening its stability.
In the meantime, the government plans to raise GH¢6.3 billion in its upcoming treasury bill auction. Market watchers are closely monitoring the situation to see if the rebound recorded last week will be replicated in this week’s auction.
