Ghana’s short-term debt market took a downturn last week as government treasury bills suffered another undersubscription, raising fresh questions abou
Ghana’s short-term debt market took a downturn last week as government treasury bills suffered another undersubscription, raising fresh questions about investor confidence and the government’s ability to sustain its domestic borrowing programme.
According to auction results published by the Bank of Ghana, the government set out to raise GH¢8.28 billion from the sale of 91-day, 182-day, and 364-day treasury bills.
However, it managed to secure just GH¢6.50 billion, leaving a shortfall of nearly GH¢1.8 billion.
The largest demand, as in previous weeks, came from the 91-day instrument.
Out of total bids worth GH¢5.49 billion, government accepted GH¢5.25 billion. The 182-day bill attracted GH¢789.20 million in bids, with GH¢784.20 million accepted.
For the 364-day bill, GH¢214.99 million worth of bids were received, of which GH¢209.54 million were taken up.
While the subscription levels dipped, yields on the shorter-term securities edged higher, reflecting weaker investor demand. The 91-day bill climbed by 11 basis points to 10.53 percent.
Similarly, the 182-day bill ticked up to 12.44 percent, from 12.41 percent the previous week. In contrast, the one-year bill eased slightly by 2 basis points to settle at 12.95 percent.
Background: A Volatile Market
The development comes barely a week after treasury auctions saw a return to oversubscription, sparking optimism that domestic investors were regaining confidence in government securities.
Ghana has relied heavily on treasury bills as a primary source of financing since international capital markets shut their doors to the country following the sovereign debt crisis that peaked in 2022.
As part of the International Monetary Fund (IMF) bailout programme, the government has been under pressure to realign its financing strategy, balancing between domestic borrowing and fiscal consolidation.
This has put treasury bills in the spotlight as the most reliable short-term instrument for plugging financing gaps.
Investor Concerns Linger
However, last week’s undersubscription indicates lingering caution among investors.
Analysts say inflationary challenge, coupled with concerns about government liquidity and repayment risks, continue to affect participation levels.
The increasing yields also suggest that investors are demanding higher returns to compensate for the perceived risks of lending to government.
The government’s reliance on the 91-day bill also underscores a deeper structural problem.
Shorter maturities provide quick financing but pile pressure on the state to roll over debt more frequently, often at higher costs, creating what economists describe as a “debt rollover trap.”
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