Investors have dumped treasury bills for the Bank of Ghana bills, which are giving about a 28% return.
This is due to the recent sharp decline in yields. Indeed, the government has in the last T-bills auction, recorded undersubscription.
“We thus expect the 100 basis points hike in the policy rate to sustain attraction for the Open Market Operations (OMOs) securities, draining demand for T-bills and limiting the downside for yields. However, the ongoing squeeze on public spending will ease the financing requirement and avert an upward reversal in T-bill rates, barring FX (foreign exchange) shocks”, said IC Insights.
Last week, the government rejected GH¢2.37 billion in bids above its yield corridor and accepted only GH¢1.69 billion out of a GH¢4.39 billion target.
The partial uptake covered just 40% of upcoming maturities worth GH¢4.22 billion, reflecting tighter supply conditions.
Consequently, yields declined week-on-week by 6.0 basis points, 23 basis points and 1.0 basis points on the 91-day, 182-day and 364-day tenors to 15.65%, 16.50%, and 18.84%, respectively.
The significant bid rejections reflect a misalignment between investor yield expectations and the government’s yield objectives, particularly as plans to reopen the bond market gain traction.
“In our view, the gap between the Monetary Policy Rate and money market yields signals a policy rate disconnect—a short-term divergence intended to steer investor interest toward limited alternative assets. However, if such rejections persist, they could gradually deplete the Treasury’s liquidity buffers, further tightening liquidity in the money market”, Databank Research said.
The government plans to raise GH¢6.68 billion this week through the issuance of 91-day, 182-day, and 364-day bills to cover GH¢6.43 billion in maturing bills.
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