Government T-bills auction oversubscribed by 15 per cent

Government treasury bill (T-Bills) auction for this week has been oversubscribed by GH¢3.90 billion as investors cash in soaring interest rates on government dated securities.

This accounts for a 15 per cent increase in over subscription, indicating investment appetite for higher yields even though, many experts have cautioned against high interest of government dated securities.

Government targeted to raise GH¢2.08 billion from the sale of both its 91-and 182-day bills but ended up receiving GH¢2.4 billion for this week’s auction.

The week-on-week yields on the government dated securities witnessed an overall approximated increase of 0.73bps and 0.98bps from 20.4 per to 21.1 per cent and 22.9 to 23.9 across the 91 and 182-day bills respectively over the past week.
Interest rates on government securities have begun to tick upwards even after the government has secured 600 million out of the three billion International Monetary Fund (IMF).

The International Monetary Fund (IMF) in its report on Ghana’s three-year Extended Credit Facility (ECF) programme noted that the country’s debt restructuring plans still leave a substantial need for T-bill issuance in the near term.

The fund said that exposed the country to uncertainty in domestic market conditions, though the programme implementation and outreach might help mitigate financing risks.

The DDEP saw the government swap a total of GH¢82 billion of old bonds to 12 new ones at a reduced coupon rate and longer tenors.

The exchange of Cocoa Bills and dollar-denominated bonds is also currently at an advanced stage.

The Creditor Committee co-chaired by China and France has also been formed to begin the restructuring of the country’s US$5.4 billion debt to bilateral partners.

The government has also, since December 2022, been engaging with its commercial creditors to restructure debts totalling US$14 billion.

Government restructuring of its debts through the DDEP saw government bonds being traded in single digits. The debt swap saw the 12 bonds being traded at 9 per cent. This, many experts hoped, signalled the market readjusting as government bonds were too expensive.

In March, government rejected all the bids for the sale of treasury bills from investors insisting that the interest rate of about 35 per cent was too high.

Government at the time sought to raise ¢2.78 billion from the T-bills to refinance maturing bills worth ¢2.55 billion.

A large part of the government debt restructuring exercise, according to financial analyst was on account of high interest payments on government bonds, especially domestic bonds which accounted for about 52 per cent of all government pubic debt.