After two consecutive weeks of weak investor turnout, Ghana’s Treasury Bills market has recorded an impressive comeback, signalling a possible renewed investor confidence in the government bills.
From failing to meet its target for two weeks running, the government saw a significant GH¢1.24 billion oversubscription of the bills in the last auction.
According to the latest auction results released by the Bank of Ghana, the government sought to raise GH¢5.27 billion in last week’s auction. At the end of the auction, it received an impressive GH¢6.51 billion in total bids. This represents an overflow or oversubscription rate of 23.5%.
Out of the bids submitted, the government accepted GH¢6.33 billion, rejecting just about GH¢173.86 million. This means that despite the initial target of GH¢5.3 billion, the government, after the overwhelming oversubscription, accepted additional GH¢1.1 billion to walk away with the GH¢6.33 billion.
This marks a sharp reversal from the previous two weeks, when the Treasury market struggled to meet its borrowing targets. 91-Day Bill Dominates Investor Interest
The 91-day Treasury bill once again remained the investors’ favourite, attracting GH¢5.4 billion in bids, accounting for more than 83 percent of total subscriptions. The 182-day bill recorded GH¢941.71 million, while the 364-day bill saw bids amounting to GH¢150.49 million, bringing total bids to GH¢6.51 billion.
There was an interesting development on the yield curve of the three bills. Without the exception of the 91-day that saw a marginal rise in interest, the two remaining bills saw a marginal decline in interest.
The interest rate of the 91-Day Bill increased from 10.4739% to 10.5301% while that of the 182-Day Bill also decreased from 12.3516% to 12.3069%. Moreover, the 364-Day bill also saw a reduction from 12.8707% to 12.8672%.
The oversubscription is a positive sign that liquidity is improving within the banking sector and among institutional investors. It also points to increased confidence in the government’s short-term fiscal instruments.
On the side of the government, the GH¢1.24 billion oversubscription gives the government some fiscal relief after weeks of tight liquidity conditions. With GH¢6.33 billion accepted, the Treasury not only covered its target but also secured GH¢1.06 billion more than planned.
This additional funding could help close near-term financing gaps and reduce the rollover risk associated with maturing bills.
If the trend continues, the government could experience a continued reduction in the interest on the bills to hit the single digit it anticipates. Lower yields would mean reduced debt-servicing costs and improved budgetary balance going into the last quarter of the year.
Meanwhile, the government plans to raise an amount of GH¢6.6 billion in its upcoming auction this week. Will the rebound last week continue this week, or will there be a reversal?
Market watchers are closely monitoring the market to see if the rebound will be sustained.
