By Leo Nelson
After a month of struggling to meet its borrowing targets, the government has finally hit a bullseye.
The latest Treasury bill auction, a critical gauge of investor confidence, was oversubscribed by a solid 15.8%, signaling a strong return of appetite for short-term government debt.
According to fresh data from the Bank of Ghana (BoG), the government raked in GHS4.36 billion from bids totaling GHS4.38 billion, bringing a much-needed sigh of relief to the state’s financing efforts.
This turnaround couldn’t have come at a better time. The government, which leans heavily on T-bill auctions to fund its day-to-day operations and maintain liquidity, has been under pressure after four consecutive weeks of missed targets.
Financial market analyst Gifty Annor Sika called the results “a much-needed shot in the arm for both the government and investors.” She noted, “After weeks of poor performance, this oversubscription proves that demand for safe, short-term instruments is still very much alive.”
The 91-Day Bill Remains King
A deeper look into the auction results reveals a clear investor favourite: the 91-day bill. This short-term instrument captured over 82% of all bids, with investors tendering an impressive GHS3.62 billion, of which the government accepted nearly GHS3.61 billion.
Sika explained that this overwhelming preference for the shortest-term bill highlights investor caution in the current economic climate.
“The focus on the 91-day bill shows that investors are hesitant to tie up their money for long periods. They want liquidity and flexibility, even as they chase competitive returns,” she explained.
While the 91-day bill dominated, other tenors also saw decent action. The 182-day bill attracted bids of GHS576.7 million, with GHS566.7 million accepted. The 364-day bill recorded GHS187.2 million in bids, accepting GHS182 million.
The broad-based interest across all maturities points to a renewed interest in the treasury market. However, Sika cautioned, “The figures show the government still has a tough time convincing investors to hold longer-term debt at current yields.”
Yield Movements Stoke Investor Fire
The analyst credits the renewed interest in T-bills partly to subtle shifts in yields. The yield on the 91-day bill nudged up by one basis point to 10.42%, making it slightly more appealing to investors. The 182-day bill yield also crept up from 12.37% to 12.41%.
However, the 364-day bill saw a minor dip in yield, falling by 2 basis points to 12.97%, which may explain its relatively lower subscription.
“Even small yield movements can drive investor behaviour,” Sika stated. “The slight rise in short-term yields gave investors the push they needed to re-enter the market after weeks of holding back.”
Confidence Returns, But It’s Fragile
The successful auction provides a much-needed boost to the government’s finances. The inability to meet targets in previous weeks had raised concerns about liquidity and the state’s capacity to fund short-term expenditures.
By securing more than its target, the government now has some breathing room to meet obligations like debt servicing and public sector wages.
“This auction gives the government critical fiscal space, but it also highlights its over-reliance on short-term borrowing,” Sika warned. “Without a long-term strategy, the risk of rolling over debt could quickly resurface.”
The successful auction may also signal a shift in investor sentiment, which had been cautious due to macroeconomic uncertainties and inflationary pressures.
The oversubscription suggests investors are slowly regaining trust in government instruments.
“Confidence is slowly creeping back, but it is fragile,” Sika cautioned. “One or two poorly managed auctions could erase these gains. The government must keep yields competitive and provide clearer policy signals to sustain this momentum.”
The government will need to maintain investor confidence by keeping yields competitive while managing inflation and exchange rate volatility.
As Sika summed it up: “This is a step in the right direction, but it’s not a victory yet. The government must focus on consistency, sustainability, and fiscal discipline if it wants to keep investor trust.”
For now, the market is celebrating this breakthrough, which offers a much-needed reprieve in an otherwise challenging economic landscape.