The government rejected GH¢10.865 billion of bids tendered for treasury bills as demand for the short-term instruments reached a record high.
The Treasury registered a 140.5% oversubscription to the tune of GH¢20.49 billion.
The government, however accepted GH¢9.634 billion, higher than the target of GH¢7.72 billion.
The 364-day bill received the highest bids estimated at GH¢8.11 billion, about 39.56% of the total bids. A little over GH¢3.9 billion were accepted.
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For the 91-day bill, about GH¢7.38 billion, representing 36.02% of the total bids were tendered. A little above GH¢4.2 billion were accepted.
The 182-day bill also saw bids worth about GH¢5 billion tendered. About GH¢1.43 billion bids were accepted.
Meanwhile, interest rates took a nosedive, reducing the government’s cost of borrowing.
The yield on the 91-day bill went down by 238 basis points from 26.85% to 24.47%. That of the 182-day bill also declined to 25.38% from the previous 27.80%. Similarly, the 364-day bill was reduced by 178 basis points to 27.29%.
Easing rates
Interest rates on government securities are showing signs of easing since the beginning of the year, with Treasury Bill yields recording significant drops.
Despite the falling yields, investor appetite remains remarkably strong. With the international capital market still closed to the country and the local bond market still dormant post domestic debt restructuring, the only available market to the government to raise resources is the T-Bill market.
In January for instance, the government borrowed GH¢38.45 billion via treasury bills against the GH¢40.57 billion offered by investors.
The steady decline of interest rates is therefore good news as it means the government would now be raising these resources at cheaper rates.
Databank Research said it expected continued bid rejections to support yield compression in the weeks ahead.
The research further highlighted that the marginal decline in yields reflected the Treasury’s firm stance in rejecting high-interest bids above its stop yield, signalling that it has sufficient buffers to meet demand.
Experts have attributed the easing of the rates and oversubscription to the limited investment portfolios available to investors.
Post DDEP, the secondary market no longer existed, therefore leaving investors with few options.
Experts argue that the new government might also be enjoying some goodwill from investors.
In an earlier interview, Economist and Lecturer at the Academic City University, Eugene Bawelle, said if this goodwill is maintained then rates are likely expected to drop further down in the coming weeks.
Mr Bawelle said it was, however, important that the positive effects of the lower rates trickle down and impact lending rates in the country.
“The drop in the T-Bill rates is positive, as it reduces the government's debt servicing costs, which is particularly important for Ghana given its recent debt challenges.”
“The effects must, however, trickle down so that businesses and individuals can also benefit through lower lending rates,” he stated.
He said the willingness of investors to accept lower yields while maintaining high participation indicated improving market sentiment.