T-Bill rate eases — Investor appetite still strong

Interest rates on government securities are showing signs of easing, with Treasury Bill yields recording significant drops for the second consecutive week. 

The 91-day bill saw its yield tumble by 43 basis points to 27.98%, while the 182-day bill dipped to 28.68%.

This follows a similar trend from last week’s auction where the rates dipped to 28.41% (91-day),  28.89% (182-day) and 30.37% (364-day).

Despite the falling yields, investor appetite remains remarkably strong. 

The latest Bank of Ghana auction saw investors pour in GH¢10.56 billion worth of bids, representing a substantial 43.85% oversubscription. 

The government, maintaining its prudent approach, however, accepted GH¢7.65 billion of the total bids. The 91-day bill continued to be investors' preferred choice, attracting over GH¢6.1 billion in bids, accounting for approximately 58% of total subscriptions. 

The Treasury accepted GH¢3.87 billion from this tenor. 

The 182-day bill also saw healthy demand, with GH¢4.419 billion in bids, of which GH¢3.7 billion was accepted. Notably, the 364-day bill received no bids during this auction period.​​​​​​​​​​​​​​​​

The declining yields, coupled with strong investor participation, suggest growing confidence in the market and could signal a potential shift toward a more moderate interest rate environment.

Reliance of T-Bill market 

With the international capital market still closed to the country and the local bond market still dormant post domestic debt restructuring, the only available market to the government to raise resources is the T-Bill market.

In January for instance, the government borrowed GH¢38.45 billion via treasury bills against the GH¢40.57 billion offered by investors.

The steady decline of interest rates is therefore good news as it means the government would now be raising these resources at cheaper rates.
Databank Research said it expected continued bid rejections to support yield compression in the weeks ahead.

The research further highlighted that the marginal decline in yields reflected the Treasury’s firm stance in rejecting high-interest bids above its stop yield, signalling that it has sufficient buffers to meet demand.

Limited portfolios 

Economist and Lecturer at the Academic City University, Eugene Bawelle, said the steady oversubscription on the market was due to the limited investment portfolios available to investors.

Post DDEP, he said the secondary market no longer existed, therefore leaving investors with few options.

He explained that the new government might also be enjoying some goodwill from investors, adding that if this goodwill is maintained then rates are likely expected to drop further down in the coming weeks.

Bawelle said it was, however, important that the positive effects of the lower rates trickle down and impact lending rates in the country.

“The drop in the T-Bill rates is positive, as it reduces the government's debt servicing costs, which is particularly important for Ghana given its recent debt challenges.”

“The effects must, however, trickle down so that businesses and individuals can also benefit through lower lending rates,” he stated.

He said the willingness of investors to accept lower yields while maintaining high participation indicated improving market sentiment.

Preferred option 

The drop in T-Bill rates is coming at a time when a recent survey by KPMG indicated that treasury bills remained the most preferred investment option, with 39% of respondents opting for these low-risk instruments.

Fixed or term deposits closely follow at 25%, further reinforcing the cautious approach among many Ghanaians, who prioritise stability and guaranteed returns amidst economic uncertainty.

However, the report said there were signs of gradual diversification in investment choices. Mutual funds, selected by 23% of respondents, are gaining traction as a medium-risk option offering balanced returns.

Additionally, commodities such as precious metals and agriculture products, accounted for 20%, which demonstrated a growing appetite for alternative investments as a hedge against inflation and economic instability.

Expectedly, higher-risk instruments such as stocks (19%) and bonds (9%) remain underutilised, pointing to limited confidence.