After four consecutive weeks of missing its borrowing target on the T-Bills market, the government has seen a moderate turnaround in the latest auction.
Investors have not been responding positively to the government bills in the past weeks, leading to week-on-week undersubscriptions, threatening the financing of the government’s recurring expenditures.
However, the latest auction held last week saw about 16% oversubscription, though the target was relatively less ambitious.
The latest auction report published by the Bank of Ghana reveals that the government targeted to borrow a total of GH¢3.8 billion last week. At the end of the auction, total bids submitted by investors amounted to a total of GH¢4.4 billion. This resulted in an excess of GH¢596.78 million, representing an oversubscription rate of 15.8%.
The auction report further reveals that the 91-day bill accumulated a total bid of GH¢3.6 billion, while the 182-day bill also accumulated GH¢576.70 million of the bids. The 364-day bill also garnered just GH¢187. 82 million.
An analysis of the report establishes that out of the GH¢596.78 million excess bids submitted by investors, a chunk of the GH¢579.78 million was accepted in addition to the target, rejecting just GH¢20 million.
This means that instead of GH¢3.8 billion, the government walked away with GH¢4.4 billion.
But this oversubscription did not come out of the blue. It came at the expense of a hike in interest rates, especially on the 91-day and 182-day bills, to make them attractive to investors.
The interest rate of the 91-Day Bill increased from 10.3265% to 10.4220%, while that of the 182-Day Bill also increased from 12.3724% to 12.4110%. However, the 364-Day bill rather saw a decline, from 12.9985% to 12.9725%.
In the meantime, the government plans to raise a relatively ambitious amount of GH¢8.3 billion in its upcoming auction this week. Will the picking demand last week continue this week, or will there be a reversal?
Market watchers are closely monitoring the market to see if the rebound will continue.
