Investor are shunning government’s short-term debt instruments – the 91-day, 182-day and 364-day Treasury bills – as liquidity on the primary market is strained on the back of unfavourable interest rates on these classes of debt securities.

Per the Treasury auction results for April 1, 2022, published by the Bank of Ghana (BoG), uptake of the Treasury bills fell short by 39 per cent [GH¢463.65million] against the target of GH¢766million – and this was inadequate to cover up this week’s maturing T-bills worth about GH¢627.48million between 91- and 182-day bills, translating into a maturity cover of 0.74x.

Similarly, results of the previous Treasury auction on March 25, 2022, revealed that the uptake of Treasuries for the 91-day, 182-day and 364-day T-bills, was far below its target and insufficient to cover the maturing debts worth about GH¢1.01billion across the same tenors. This translated into a 77 per cent deficit against the target size and a maturity cover at 0.52x.

The 250 basis points (bps) hike in the monetary policy rate to 17 per cent on March 21, 2022, continues to weigh on the Treasuries’ uptake as investors seek to demand BoG bills with higher returns relative to the T-bill.

The Monetary Policy Committee increased the policy rate on the back of rising inflation and also to restore the credibility of monetary policy because at the previous rate of 14.5 per cent it was below inflation, which is 15.7 per cent; thereby undermining investor confidence in the inflation outlook.

Although yields on T-bills are lower compared to Bank of Ghana bills, there has been some level of increase in the yields. For instance, since the hike in the policy rate, yields on the 182-day bill advanced by 185bps to settle at 15.46 per cent, while the 91-day bill rose by 143bps to clear at 14.85 percent.

In the coming week, a total of maturing 91- to 364-day bills worth GH¢1.20billion will be due, and per the BoG published data, the Treasury is seeking to raise a total amount of GH¢1.51billion to refinance the above maturing debt securities across the same tenors.

Market analysts expect that yields on Treasury securities will continue on an upward trajectory to attract bids from investors in the next auction, which is scheduled for Friday.

Secondary market

Unlike the primary market, trades last week on the secondary market saw a notable performance, as total face value debt securities traded amounted to GH¢4.31billion compared with GH¢1.78billion FV traded the previous week – when investors were uncertain of the market’s direction, following the various monetary and fiscal policy announcements.

Quarter-2 Issuance Calendar

Government has announced its issuance calendar for the second quarter of 2022 (April to June). During the period, it plans to raise a gross amount of GH¢24.70billion – of which GH¢20.10billion will be used to roll over maturities, while the remaining GH¢4.6billion will be used to meet government’s financing needs.

Consistent with the Medium-Term Debt Strategy (MTDS), government may announce tap-ins/reopening of other existing instruments depending on market conditions.