But Will Locals Join the Party?
A tsunami of foreign cash has slammed into Ghana’s bond market, sending trading volumes skyrocketing and leaving local investors watching from the sidelines.
Last week, bond trading on the secondary market exploded to a staggering GH¢3.47 billion, a mind-boggling 284.53% jump from the previous week’s GH¢904 million. Driving this frenzy were offshore buyers, who pounced on short- and medium-term bonds, particularly the popular February 2027 paper, which saw a massive GH¢1.14 billion in trades.
This sudden rush was triggered by the Bank of Ghana’s dramatic move to slash the Monetary Policy Rate by 350 basis points to 21.5 percent. This aggressive cut repriced the entire yield curve, essentially rolling out a red carpet for international investors hungry for returns.
Foreigners Feast as Locals Fumble
While foreign portfolio flows dominated the buying spree, Ghanaian investors largely held back. Local fund managers and pension funds are playing a cautious “wait-and-see” game, worried about liquidity and still-high real yields despite the rate cut. They’re also keeping a close eye on the nation’s fiscal health, which remains a concern.
Foreign buyers, on the other hand, saw a golden opportunity. They were drawn by Ghana’s attractive nominal yields and the prospect of capital gains as bond prices climb. The sweet spot for these investors was the 2027-2030 maturity bracket, where the average yield-to-maturity was a juicy 16.35%.
A Rate Cut’s Ripple Effect
Analysts say the timing of the rate cut was a masterstroke. By buying in ahead of the cut, foreign investors are now poised to reap the rewards. They can either enjoy the capital appreciation as bond prices rise or move into longer-term bonds to lock in that attractive income.
However, relying too heavily on foreign money is a risky game. A sudden shift in global sentiment could cause a quick reversal, sending yields soaring and draining liquidity. For the market to truly stabilize, domestic players—like pension funds and mutual funds—need to step up and participate. Their sustained presence would make the market less vulnerable to external shocks.
What’s Next for the Market?
This policy easing is also a boost for the wider economy, potentially lowering borrowing costs for businesses and supporting a nascent recovery. But authorities must balance this stimulus with vigilance, ensuring they don’t lose the battle against inflation.
The big question now is whether this foreign-driven rally is a one-off technical surge or the start of a sustained recovery. The coming weeks will be crucial. Will foreign interest hold, and more importantly, will local investors finally get in on the action and provide the stable demand the market desperately needs?