Treasury bill auction misses target by 6.2% as government rejects higher yield bids

Investor interest in the Treasury bill market remained robust last week, but the government's latest auction failed to meet its fundraising target after the Treasury declined to accept some bids carrying higher interest rates.

Results released by the Bank of Ghana showed that investors submitted bids worth GH¢4.16 billion across the 91-day, 182-day and 364-day Treasury bill instruments. Of this amount, the Treasury accepted GH¢3.16 billion, below its target of GH¢3.37 billion.

The accepted amount was GH¢207.73 million lower than the target, resulting in an under-subscription rate of 6.2%.

Despite the shortfall, the auction recorded enough investor demand to cover the government's financing needs. However, the Treasury chose to reject some bids in an effort to contain borrowing costs by avoiding offers with relatively higher interest rates.

The 364-day Treasury bill attracted the highest level of investor interest, receiving GH¢1.86 billion in bids, of which GH¢1.10 billion was accepted.

The 91-day bill, which serves as the benchmark instrument, recorded GH¢1.69 billion in bids, with GH¢1.63 billion accepted. The 182-day bill received GH¢618.90 million in bids, out of which GH¢435.82 million was accepted.

The latest auction marks a significant shift from the previous week's 60.2% oversubscription, highlighting changing market conditions as investors seek higher returns amid inflation concerns, increased government borrowing requirements and expectations of further monetary policy easing.

These expectations were reflected in Treasury bill yields, which rose across all maturities. The yield on the 91-day bill increased to 5.87% from 5.73% the previous week. The 182-day bill climbed to 7.79% from 7.69%, while the 364-day bill rose to 12.93% from 12.82%, indicating stronger investor demand for higher returns, particularly on longer-dated securities.

The government is expected to return to the market this week with plans to raise GH¢5.67 billion through its next Treasury bill auction to support its short-term financing needs.