Government’s auction for treasury bills saw a significant decline in investor participation, reflecting a growing disinterest in the financial instrument. The drop in patronage, which amounted to 38.5%, coincided with a surprising decrease in interest rates across all three instruments.
Government set out to borrow about GH¢ 5.98 billion but got about GH¢3.67 billion representing a shortfall of about GH¢2.3 billion. Interest rates were lowered with the 91-day bill going down from 25.64% to 25.45%, while the 182-day also dropped from 26.92% to 26.80% with the one-year note dropping from 28.67% to 28.51%.
This marks a departure from recent trends where interest rates have been steadily rising to attract investors amid the government’s aggressive borrowing programme. The unexpected rate cut has raised eyebrows, especially given the ongoing inflationary pressures. In September, the inflation rate climbed to 21.5%, up from 20.4% in August.
The 91-day treasury bill remained the most popular among investors, accounting for 79.2% of total purchases. However, even this traditionally favoured instrument experienced a decline in demand. The 182-day and one-year bills saw even lower patronage, contributing 15.6% and 5.2% respectively.
The reasons behind the interest rate reduction remain unclear, particularly given the government’s need to finance a substantial budget deficit. Some analysts speculate that the move might be a strategic attempt to ease borrowing costs or perhaps a response to the recent positive assessment from the International Monetary Fund (IMF).
The decline in treasury bill patronage could have implications for the government’s ability to meet its funding needs. It may be forced to explore alternative financing options or reassess its borrowing strategy. Investors, on the other hand, may be seeking higher returns elsewhere or expressing concerns about the potential risks associated with government debt.
