Investors have dumped treasury bills for the Bank of Ghana bills, which are giving about a 28% return.
This is due to the recent sharp decline in yields. Indeed, the government has in the last T-bills auction, recorded undersubscription.
“We thus expect the 100 basis points hike in the policy rate to sustain attraction for the Open Market Operations (OMOs) securities, draining demand for T-bills and limiting the downside for yields. However, the ongoing squeeze on public spending will ease the financing requirement and avert an upward reversal in T-bill rates, barring FX (foreign exchange) shocks”, said IC Insights.
Last week, the government rejected GH¢2.37 billion in bids above its yield corridor and accepted only GH¢1.69 billion out of a GH¢4.39 billion target.
The partial uptake covered just 40% of upcoming maturities worth GH¢4.22 billion, reflecting tighter supply conditions.
Consequently, yields declined week-on-week by 6.0 basis points, 23 basis points and 1.0 basis points on the 91-day, 182-day and 364-day tenors to 15.65%, 16.50%, and 18.84%, respectively.
The significant bid rejections reflect a misalignment between investor yield expectations and the government’s yield objectives, particularly as plans to reopen the bond market gain traction.
Credit: joyonline