BY Grace Zigah
Investor appetite for short-term government securities in Ghana has taken a notable hit, with analysts citing negative real returns as the primary driver behind the waning interest.
This development comes amid ongoing inflationary pressures and strategic policy shifts aimed at managing the country’s borrowing costs.
Last week, investor bids for treasury bills plummeted by 27% week-on-week, amounting to GH¢5.29 billion.
The government accepted GH¢4.73 billion in bids, falling short of both the GH¢6.09 billion in maturing securities and the GH¢6.32 billion auction target.
The weaker-than-expected turnout has triggered concerns among analysts, who point to the unattractive real returns on offer as a disincentive for investors.
Currently, inflation in Ghana remains elevated, hovering around 22%. However, the average yield on T-bills sits at approximately 16%, resulting in a negative real return of roughly 6%.
This means investors are effectively losing value on their investments when adjusted for inflation.
Financial market analysts, including those at Databank Research, initially anticipated improved demand following Ghana’s successful second review under the International Monetary Fund’s Extended Credit Facility (ECF) programme.
That optimism, however, has been tempered by the market’s realization that the real returns remain insufficient to justify aggressive institutional participation.
Interestingly, this weak T-bill performance contrasts with a significant uptake of the Bank of Ghana’s 56-day bill, which attracted a substantial GH¢12.44 billion at a 28% yield.
Analysts say this disparity highlights investor preference for shorter, higher-yielding instruments in the current inflationary climate.
The government’s approach to the 364-day bill auction also signalled a strategic shift.
Last week, the bill was sold only via non-competitive bids at yields below 17%, suggesting the Treasury is attempting to suppress near-term borrowing costs.
This is seen as a move to create favourable conditions for future bond issuance, particularly as the government continues to manage debt sustainability under IMF guidance.
Yields across the T-bill curve declined last week, with the 91-day, 182-day, and 364-day securities falling by 9 basis points (bps), 26bps, and a substantial 142bps respectively.
The new rates are 15.23% for the 91-day bill, 15.77% for the 182-day, and 16.96% for the 364-day paper.
Market watchers suggest that the dip in yields is likely to persist in the short term, driven by expected disinflation in the April 2025 inflation report, due later this month.
This aligns with the government’s broader monetary policy strategy, which aims to ease inflation while maintaining fiscal discipline.
The recent developments mark a continuation of Ghana’s complex journey through macroeconomic recovery, following the severe fiscal stress that culminated in the country’s 2022 debt restructuring and subsequent engagement with the IMF.
While progress has been noted in stabilizing key indicators, the challenge of delivering positive real returns to investors remains a key hurdle in deepening domestic debt markets.
