Government misses treasury bill target for seventh week, undersubscribed by 10%

Ghana’s government missed its treasury bill target for the seventh consecutive week. Investors bid GHS 4.48 billion at the latest auction compared to a target of GHS 4.89 billion.

This undersubscription represents a 10% shortfall, worse than the previous week’s performance. Investors continue to demand higher interest rates for short-term government debt. The government accepted GHS 4.0 billion of the GHS 4.48 billion in bids received.

This ongoing undersubscription signals persistent challenges in Ghana's public finance strategy. The government relies on treasury bills to manage its short-term cash needs. A consistent failure to meet targets can lead to increased borrowing costs. It also reflects investor caution about the government's ability to manage its finances. This trend follows previous reports of consistent undersubscriptions, indicating a broader struggle to attract sufficient domestic financing.

The Bank of Ghana confirmed the latest auction's results. It noted the continued investor demand for higher interest rates. The 91-day bill rate remained stable at 4.92%. However, the 182-day rate increased slightly to 6.97%. The 364-day yield saw a more significant rise, reaching 10.19%. These rising rates affect the government’s borrowing costs. Higher interest payments strain the national budget. They can also siphon funds from other critical sectors.

Market observers will closely watch future treasury bill auctions for any shift in investor sentiment. The continued search for higher returns by investors suggests a perception of increased risk. Policymakers may need to consider new strategies to attract debt financing. This could involve offering even more attractive interest rates or exploring alternative funding sources. The sustained undersubscription could also influence the Ghana cedi’s stability. It can also impact overall economic confidence in the coming months. The government’s ability to meet its financing needs is crucial for economic stability.

Specifically, the 91-day bill attracted GHS 1.89 billion in bids, with GHS 1.88 billion accepted. The 182-day bill received GHS 764.25 million in bids, all of which were accepted. For the 364-day bill, bids totalled GHS 1.82 billion, with GHS 1.78 billion accepted. The sustained demand for the shortest-term bill suggests investors prefer liquidity and lower risk exposure. The climbing rates for longer-term bills show investors require greater compensation for tying up their money longer.