T-Bills Auction: Gov’t borrows GHS 8.2bn in April
In April 2023, the Ghanaian government borrowed ¢8.25 billion on the treasury market, exceeding its gross target by 18.20%. The borrowed funds were utilized to refinance maturities worth ¢6.3 billion, signaling a robust demand for government debt. However, yields on T-bills increased in April, with the 91-day, 182-day, and 364-day yields rising to 19.95%, 22.71%, and 27.26%, respectively, compared to the previous month.
This rise in yields could be attributed to the unexpected 150 basis points hike in the policy rate, which has renewed upward drive on T-bill yields after their recent decline from a peak of 35.0% to between 18.5% and 26.8% by mid-March 2023. Nevertheless, analysts believe that the improving economic outlook could drive yields lower at the end of May 2023, though there is still a potential for a further rise this week.
In the near-term, the Treasury’s continued reliance on the money market, without an active primary bond market, is expected to keep yields elevated around the current levels of between 19.0% – 27.0%. However, analysts expect trading in T-bills to dominate the secondary fixed-income market in 2023, as the lack of price action on the bond market continues.
This dominance of T-bill trading is expected to drive down trading yields with a spillover to the primary market for T-bills, supporting the downside view on yields by the end of 2023. Analysts have also pointed out that the IMF program, set to begin later in the year, may be a catalyst for the downturn in yields in late 2023.
The high yields on T-bills offer an attractive investment opportunity for investors seeking short-term, low-risk investments. However, the high borrowing costs could pose a challenge for the Ghanaian government, as it seeks to raise funds for its budgetary needs. The high debt burden has been a concern for policymakers, and the government has been making efforts to contain the rising debt levels, including seeking assistance from international financial institutions like the IMF.
The Ghanaian treasury market has witnessed robust demand for government debt in April 2023, with the government exceeding its gross target for borrowing. However, rising yields on T-bills have also been observed, which could be attributed to the recent hike in the policy rate. While analysts expect yields to settle lower at the end of May 2023, continued dependence on the money market and lack of price action on the bond market could keep yields elevated in the near term. Nevertheless, analysts expect trading in T-bills to dominate the secondary fixed-income market in 2023, leading to lower trading yields and a potential spillover to the primary market by the end of the year.
