Treasury bill auction records first undersubscription in 15 weeks

Ghana’s Treasury bill market experienced a slight setback last week after the government failed to meet its fundraising target, ending a streak of strong oversubscriptions that had lasted for 15 consecutive weeks.

Figures released by the Bank of Ghana show that investors submitted bids worth GH¢8.73 billion for the 91 day, 182 day and 364 day Treasury bills. Out of the total amount tendered, the government accepted GH¢7.9 billion.

The outcome left the auction undersubscribed by about GH¢139 million, translating into an undersubscription rate of roughly 7.45 percent and breaking the sustained run of heavy demand for the short term government instruments.

The 91 day Treasury bill remained the most attractive instrument to investors, drawing bids of GH¢6.15 billion. The government accepted GH¢5.88 billion of that amount.

Demand for the 182 day bill reached GH¢2.06 billion, out of which GH¢1.63 billion was taken up.

The 364 day bill recorded the lowest demand, with total bids amounting to GH¢529.46 million. Of this figure, GH¢480.46 million was accepted.

Market analysts attribute the softer demand partly to declining yields across most maturities, which appear to be tempering investor interest in government securities.

The yield on the 91 day Treasury bill declined by 11 basis points to 4.71 percent from 4.82 percent recorded in the previous auction.

Similarly, the 182 day bill saw its yield drop slightly by 2 basis points to 6.28 percent from 6.30 percent.

In contrast, the yield on the 364 day instrument edged up by 6 basis points to 9.40 percent.

According to analysts, liquidity conditions that previously supported aggressive bidding in the Treasury market are gradually easing, while the declining returns on the instruments are making them less appealing to some investors.

They also point to renewed activity in the equities market, where improving price discovery and stronger fundamentals in certain stocks are beginning to attract investors who might otherwise have channelled funds into short term government securities.

For the upcoming auction, the government is seeking to raise GH¢5 billion through Treasury bills.