By Joshua Worlasi AMLANU and Ebenezer Chike Adjei Njoku
Investors are scrambling to secure attractive returns on Treasury bills (T-bills) as government rejects a record GH¢8.2billion in bids to drive interest rates lower.
At the latest auction, total bids surged to GH¢17.7 billion – the highest in months – yet only GH¢9.4billion was accepted, signalling a firm stance on reducing borrowing costs.
This marks a significant increase in rejected bids compared to GH¢2.9billion at the previous auction, reinforcing government’s focus on lowering interest rates. The move has contributed to a continued decline in T-bill yields, with the 91-day bill dropping from 27.98 percent to 26.86 percent, the 182-day bill falling from 28.69 percent to 27.81 percent and the 364-day bill decreasing from over 30 percent to 29.07 percent.
Investor Confidence Strengthens
Market observers attribute the heightened demand for T-bills to renewed investor confidence, bolstered by Ghana’s stable political transition and improving macroeconomic indicators.
“Now that there’s clarity in political leadership and economic stability is improving, investors see the opportunity to lock-in attractive yields,” said Courage Boti, an economist at GCB Bank.
Government’s firm stance on rejecting expensive bids is reshaping market expectations.
“As long as demand remains high, authorities can steer rates lower by rejecting higher bids and guiding the market toward a preferred range,” Mr. Boti explained.
Inflation, Policy and Future Outlook
The decline in T-bill yields coincides with Ghana’s inflation rate easing to 23.5 percent in January 2025, the first drop in five months. Non-food inflation declined to 19.2 percent, though food inflation rose to 28.3 percent. This moderation in inflation has eased some pressure on interest rates, with investors expecting a more measured monetary policy stance from the central bank.
However, analysts caution that further yield declines will depend on broader economic conditions. “Yields won’t fall sharply in a vacuum. As inflation trends lower and real yields compress, the pace of decline will likely moderate,” Mr. Boti noted.
Government has set a lower target of GH¢7.73billion for the upcoming auction, signalling a continued effort to control borrowing costs. Additionally, market participants will be closely watching Finance Minister Dr. Ato Forson’s budget presentation on March 11 for insights into future borrowing plans.
Balancing Borrowing Costs and Fiscal Needs
While government’s strategy aims to curb interest rates, it must also ensure sufficient funding for its fiscal commitments. Analysts warn that external shocks could influence market conditions, potentially altering the current trajectory of falling yields.
“The key expectation from the upcoming budget is fiscal prudence and commitment to consolidation,” Mr. Boti said. “Investors want assurance that revenue targets will be met without excessive borrowing that could derail market confidence.”
Despite uncertainties, the outlook remains cautiously optimistic. Government’s fiscal discipline and focus on revenue growth – without introducing new taxes – have reassured some investors.
“The strategy leans on improving revenue collection rather than imposing additional taxes, with IMF technical support aiding the process,” he added.
With T-bill yields on a downward trend and economic indicators stabilising, investor attention will remain on fiscal policy execution.
“An investor-friendly budget will support market confidence, help sustain the cedi’s resilience and promote economic growth as borrowing costs decline,” Mr. Boti said.
