Upward sloping yield curve maintained

AN UPWARD sloping yield curve was maintained throughout the year despite the further reductions in yields sustained by the Government of Ghana's money market instruments.

Evidence explaining the trends of yields on the Ghanaian money market could best be explained by the shift of market preferences for long-dated higher yielding securities.

This trend has been underpinned by a steady decline and realignment of interest rates, in line with generally declining inflation expectations, Databank's review of the year 2006 had stated.

The report, which was reviewed by Nii Ampa-Sowa of Databank, explained that the benchmark 91-day Treasury Bill rate declined from 2005's year-end level of 11.45 per cent to 9.64 per cent, while that of the 182-Day Bill and I-Year Note declined by 2.25 per cent and 3.5 per cent from their year-end levels in 2005, to levels of 10.53 per cent and 13 per cent, respectively.

The yields on the medium-term Government instruments also assumed a downward trend with that of the 2-Year Note, shedding 3.2 per cent over the year to 13.5 per cent.

The 3-Year Bond closed at a level of 14 per cent, down 3.5 per cent from its year-open level.

To enhance the liquidity of the nation's medium term securities, and also to develop national bond market, the 2-Year Notes and 3­Year Bonds were listed on the Ghana Stock Exchange on October 13, 2006.

The issuing of a 5-Year Government of Ghana Bond for ¢650 billion in December 2006 was heavily tendered (¢2,207.42 billion), which resulted in a total amount ¢756.6 billion being allotted. This underscores the demand for longer-6dated securities in the country.