The recent shortfall in the government’s Treasury Bill auction, where GH¢5.29 billion was raised against a target of GH¢6.55 billion, marks a concerning trend of undersubscription.
This would be the fourth consecutive week the Government has missed its Treasury Bill auction target.
Despite offering yields that exceed the June inflation rate of 22.8%, the demand for these short-term instruments fell short, likely due to the liquidity squeeze faced by primary dealers, especially commercial banks.
This liquidity squeeze is partially driven by a new cash reserve ratio requirement imposed by the Central Bank, which, while aiming to encourage lending to the private sector, has limited the banks’ capacity to invest in government securities.
This regulatory shift aligns with broader economic goals but has inadvertently led to a GHS 1.25 billion funding gap in the latest auction.
Investor interest was highest in the 91-day Treasury Bill, with bids amounting to GHS 4.10 billion, followed by the 182-day bill at GHS 967 million and the 364-day bill at GHS 231 million.
The yields across the three tenors have remained relatively stable, with only a slight increase of 0.04% in the 91-day bill to 24.82%, while the other tenors saw no change with the 182-day and 364-day bills remaining constant at 26.76% and 27.85%. respectively.
Looking forward, the government plans to raise GHS 4.96 billion in its next T-Bill auction, focusing on 91-day, 182-day, and 364-day bills.
This move is intended to meet short-term liquidity needs while catering to investor preferences, despite the current liquidity constraints.
Meanwhile, the Government has unveiled plans to raise GHS 78.44 billion from the domestic money market during the third quarter of 2024.
Of this amount, GHS 53.80 billion is earmarked for rolling over maturing short-term securities, with the remaining GHS 24.63 billion designated for fresh issuances to meet the government’s financing needs.
This follows a robust first half of 2024, during which the government raised GHS 115.77 billion from the treasury market, a 70.22% increase year-on-year. The first six months of the year saw total bids from investors amounting to GHS 116.07 billion.
