Heightened T-bills demand adds to debt stock

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A further GH¢1.64billion was added to the domestic component of the public debt stock in September 2023, as the Treasury recorded sustained demand for Treasury bills (T-bills) during the month.

The debt stock stood at GH¢473.2billion in December 2022, approximately 77.5 percent of gross domestic product, but reached GH¢575.5billion in June 2023 according to central bank data.

In September investors submitted bids worth GH¢13.07billion – 8.2 percent higher than the gross target of GH¢12.01billion BoG had set, and 10 percent higher than the demand in August 2023.

According to official data, government accepted GH¢12.88billion from the total bids received. This amount was utilised to refinance maturing T-bills worth GH¢11.23billion.

The monthly performance data also revealed significant changes in yields across different tenors. The 91-day T-bill yield rose to 28.5 percent, marking a 148-basis point (bps) increase. Similarly, the 182-day T-bill yield advanced to 30.68 percent – up by 206bps – while the 364-day T-bill yield jumped to 32.51 percent, reflecting a 127bps increase.

Despite a recent decrease in headline inflation observed in August, which dropped from 43.1 percent in July 2023 to 40.1 percent primarily due to a decline in food prices, it continues to remain significantly above the upper limit set by monetary authorities – exceeding it by more than ten-fold. As a result, analysts do not expect yields to decrease in the foreseeable future.

“We foresee yields sustaining their upward trend as investors seek to further narrow inflation-adjusted losses,” analysts at Databank Research said in a note.

The Treasury is planning to offer GH¢2.11billion in the upcoming T-bill auction scheduled for Friday, October 6, 2023. This offering is intended to refinance maturing bills totalling GH¢1.97billion. DataBank Research believes that this lower refinancing pressure for the week may help stabilise the rising T-bill yields seen in recent auctions.

Secondary market

In the secondary bond market for Treasury securities, total market turnover however declined significantly, by 33.78 percent week-on-week to GH¢401.11million. Trading activity in the secondary bond market was primarily skewed toward shorter-term maturities, with the 2027 to 2030 bonds accounting for approximately 94 percent of the total face value traded. Among these bonds, the February 2027 maturity was particularly active with a trading volume of GH¢371.02million.

During the reporting period, 2027 to 2030 tenors traded at an average yield of 14.34 percent; meanwhile, the 2031 to 2034 papers were exchanged at an average yield of 12.96 percent.

Market analysts expect trading activity to remain buoyant in the coming weeks, as indications from the ongoing International Monetary Fund (IMF) review suggest potential improvements in Ghana’s fiscal position, which could positively impact the bond market.

“We expect trading activity to remain upbeat, as comments from the ongoing IMF review hint at an improving fiscal position,” Databank Research stated.

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