Govt fall short of GH¢2.296 in T-Bill auction

The government's latest short-term debt auction has raised concerns about investor confidence in the market. The auction, which aimed to raise GH¢6.66 billion, fell short of its target by GH¢2.29 billion, with only GH¢4.37 billion raised at the close of the auction. 

This significant undersubscription marks a notable dip from last week’s GH¢353 million shortfall, sparking questions about the government's ability to meet its financial obligations.

Investor interest 

The auction results reveal a persistent trend of investor preference for short-term instruments. The 91-day bill continued to dominate demand, with the government accepting all bids tendered for the instrument and raising GH¢2.65 billion. In contrast, demand for medium and long-dated tenors remained subdued, with the 182-day bill attracting GH¢1.67 billion and the 364-day bill attracting a mere GH¢48 million.

Yields decline 

Despite the undersubscription, yields across the three instruments recorded modest declines, consistent with the Bank of Ghana's disinflation-focused monetary policy stance.

The 91-day bill held steady at 14.79 per cent, while the 182-day bill dipped by 3 basis points to 15.45  per cen, and the 364-day bill fell 12 basis points to 15.79  per cen.

These marginal yield declines suggest an improving inflation outlook and possible easing of short-term funding pressures for the government.

Test investor confidence

The upcoming auction under Tender 1958 is targeting GHS 7.58 billion, an increase of GHS 919 million over the current week's target.

This will be a crucial test of investor confidence in the market, as the government ramps up its mobilisation efforts to meet looming maturities.

Will investors respond positively, or will the trend of undersubscription continue? Only time will tell.

Analysis

The undersubscription in the latest debt auction raises concerns about the government's ability to meet its financial obligations.

While the decline in yields suggests an improving inflation outlook, the persistent preference for short-term instruments may indicate investor caution.

As the government looks to raise more funds in the upcoming auction, it remains to be seen whether investor confidence will improve or continue to wane.