The Government of Ghana is set to raise GH¢8.26 billion through the issuance of treasury bills today, March 14, 2025. This auction aims to refinance maturing bills totalling GH¢7.91 billion, as the government continues its reliance on short-term borrowing to meet financing needs.
The funds will be sourced from 91-day, 182-day, and 364-day treasury bills, which remain critical instruments in the domestic financial market. Despite the aggressive borrowing target, the market has recently experienced declining yields, signalling easing borrowing costs. Last week, treasury bill yields fell to nearly 16%, one of the sharpest declines in recent months.
Market Dynamics and Investor Trends
Investor activity in the treasury market has slowed, with many institutional investors gravitating toward shorter-term instruments offering better returns. This trend is evident in the increasing popularity of the Bank of Ghana’s 56-day bill, which saw a remarkable 65.81% week-on-week surge in uptake, reaching GH¢8.94 billion last week
Analysts predict that yields may approach a near-term floor as reduced market participation slows the pace of yield declines. However, uncertainty persists due to inflationary pressures and the fear of rejected bids, a phenomenon that has recently influenced market behaviour.
“We contend that despite a hawkish inflation outlook, treasury yields may continue to decline. Lingering concerns over ‘bid rejection’ and uncertainty around rates could delay market stabilization. The direction of yields will depend on the Monetary Policy Committee’s (MPC) upcoming decision on the Monetary Policy Rate (MPR),” stated a report by Databank Research
Performance Review from Last Week
Treasury bill yields last week experienced one of the sharpest drops in recent times. Investor bids fell by 43.5% week-on-week to GH¢10.31 billion, reflecting dampened interest. Despite this, total uptake exceeded expectations, standing at GH¢6.22 billion—surpassing the target of GH¢5.74 billion and covering maturing obligations of GH¢5.45 billion
The breakdown of last week’s performance shows significant declines across all tenors:
91-day bill: Yield dropped to 17.71%, a decline of 307 basis points.
182-day bill: Yield fell to 18.97%, a decrease of 402 basis points.
364-day bill: Yield declined to 19.98%, down by 272 basis points.
Outlook
As the government embarks on today’s auction, the interplay between declining yields and shifting investor preferences will likely define market outcomes. Analysts and market participants are closely watching the MPC’s next move, which could either stabilize the market or add further uncertainty to the current trajectory.
This auction underscores the government’s dependence on domestic borrowing amid persistent economic challenges, highlighting the delicate balancing act required to manage debt sustainability while addressing liquidity needs.
Story by: Mercy Addai Turkson #ahotoronline.com
