Ghana Misses Treasury Bills Target Again as Investor Confidence Wanes

The Government of Ghana failed to meet its Treasury bills (T-bills) target for the second consecutive week, as investors continued to seek higher-yielding alternatives amid persistent market uncertainty and inflationary pressures.

According to the latest trading results released by the Bank of Ghana (BoG), the government raised GH¢4.619 billion out of a target of GH¢5.329 billion, representing a 13% undersubscription. Despite the shortfall, the government accepted all bids tendered across the various maturities.

The results underscore a growing challenge for the government as it relies heavily on short-term borrowing to fund its operations amid tight liquidity conditions and subdued investor appetite.

91-Day Bill Dominates Subscriptions

A breakdown of the auction data showed that the 91-day bill remained the most preferred instrument among investors, accounting for over 81% of total bids. About GH¢3.74 billion worth of bids were received for the 91-day paper.

The 182-day bill followed with GH¢567 million in tenders, while GH¢309.3 million were submitted for the 364-day bill.

Analysts attribute this strong preference for shorter maturities to investor caution, given uncertainty around Ghana’s fiscal trajectory and the potential direction of interest rates in the coming months.

“The market is clearly signaling a preference for liquidity and short-term exposure. Investors want to minimize duration risk and maintain flexibility as economic conditions remain fluid,” said one fixed-income analyst at a leading investment firm in Accra.

Yields Edge Higher Across the Curve

Despite the undersubscription, yields on T-bills continued to inch upward, reflecting rising inflation expectations and tightening monetary conditions.

The 91-day bill yield climbed 14 basis points to 10.81%, up from 10.67% the previous week.
The 182-day bill also advanced to 12.49%, compared to 12.30% a week earlier.
Similarly, the 364-day bill rose by 8 basis points, reaching 12.95%.

These marginal increases suggest that investors are demanding slightly higher returns to compensate for macroeconomic risks and uncertainty over fiscal stability.

Market watchers say the steady rise in yields could put upward pressure on government borrowing costs in the near term — at a time when fiscal space remains constrained by weak revenue inflows and elevated interest payments.

Investor Sentiment Remains Fragile

Investor confidence in the domestic debt market has been slow to recover since the Domestic Debt Exchange Programme (DDEP), which restructured approximately GH¢203 billion of local bonds in 2023.

While the government has since re-established its short-term borrowing program, the continued undersubscriptions highlight lingering caution among institutional investors, particularly banks and pension funds.

“Confidence is improving, but not fast enough. Many institutional investors are still cautious about long-term commitments given the restructuring experience and relatively low real returns on T-bills,” noted an economist at one of Ghana’s leading research institutions.

Some investors have instead shifted toward corporate debt instruments, high-yield deposits, or foreign currency assets, seeking better returns and diversification.

Fiscal Pressures and Funding Challenges

T-bills have become a crucial financing tool for the government, especially as access to external capital markets remains limited following Ghana’s sovereign debt default in 2022.

With the ongoing International Monetary Fund (IMF) Extended Credit Facility (ECF) program, Ghana is expected to strengthen domestic resource mobilization and enhance fiscal discipline. However, the recurring shortfalls in Treasury auctions suggest that the government may face cash flow pressures if subscription rates remain below targets.

According to some analysts, the Ministry of Finance might have to offer more attractive yields to lure investors or reduce the frequency and size of auctions to align with current market realities.

“The government will need to strike a careful balance — raising enough to meet short-term obligations without driving up yields too aggressively, which could increase debt-servicing costs,” said another financial analyst.

Macro Context: Balancing Inflation and Borrowing Costs

Ghana’s inflation remains elevated, hovering around 27%, although it has eased from highs seen in 2023. The Bank of Ghana’s policy rate currently stands at 29%, aimed at anchoring inflation expectations and stabilizing the cedi.

However, the high benchmark rate has also kept borrowing costs expensive, discouraging both private-sector credit growth and investor participation in government securities that yield below inflation-adjusted returns.

In this context, short-term investors continue to adopt a cautious approach, preferring instruments that offer faster rollovers and limited exposure to long-term risks.

The Road Ahead: Restoring Market Confidence

For the government to restore full investor confidence and improve subscription rates, experts say transparency, macroeconomic stability, and credible fiscal consolidation will be essential.

As the IMF program progresses, successful reviews and clear communication on fiscal reforms could help reassure investors of Ghana’s commitment to long-term stability.

Additionally, diversifying funding sources — including diaspora bonds, green bonds, and private sector partnerships — could reduce pressure on domestic borrowing and provide alternative avenues for development financing.

“The T-bill undersubscription is not just about yields — it reflects broader investor sentiment about Ghana’s fiscal path. The government must stay consistent in its reform efforts to rebuild credibility in the capital markets,” an investment strategist told Modern Ghana.

Conclusion: Signals of a Cautious Market

The latest Treasury auction results serve as a reminder that Ghana’s domestic debt market remains sensitive to policy signals, interest rate expectations, and investor confidence.

While the government continues to meet short-term obligations through domestic borrowing, the sustained undersubscriptions indicate that investors are still adopting a wait-and-see approach.

Unless yields adjust upward or economic stability improves significantly, Treasury bill auctions may continue to face headwinds — a development that could complicate short-term fiscal management.

As one analyst aptly summarized:

“Investors are watching the government’s next fiscal moves closely. The days of automatic oversubscriptions are over — confidence must now be earned.”

Source: Accra Business News