The government will pay an interest rate of 29.8% on the 3-year bonds

The government of Ghana will pay 29.85% for a 3-year bond issued on Thursday, July 21, 2022.

This is not a surprise, as interest rates on Treasury bills are currently at a low of 26%.

According to the auction results, the government got about ¢1.11 billion, well below its target.

business joy understands that the majority of foreign investors did not participate in the sale of the debt instrument, which was originally a 5-year bond, but the term or maturity period was reduced to 3 years.

Some analysts believe the coupon rate of 29.85% was slightly below secondary market levels, which were quoted above 30% by investors across the domestic yield curve.

Based on the amount raised against the corresponding maturity size of ¢4.69 billion, the government was unable to meet its refinancing target. The maturing bond was a 5-year bond, but the government issued a 3-year bond to refinance the 5-year bond.

However, investors holding the 5-year bond did not renew for a 3-year term, but instead demanded redemption.

“Given the continued aversion of foreign investors to our local currency bonds, we can say with certainty that domestic investors largely dominated this transaction. This is one of the main reasons why the transaction did not achieved the refinancing target as the offshore investors accounted for 52% of the maturing bond and as they chose to repatriate their maturities rather than roll them over for another term, this was always going to create a shortfall in the amount raised,” an analyst who chose to remain anonymous told Joy Business.

Meanwhile, the government secured $81.23 million from the 5-year national currency denominated Treasury bond maturing in November 2026. This debt instrument was via a tap issuance.

The coupon rate was 6%, below the initial price guidance of 7.25%.

The last time the government issued a three-year bond, it agreed to pay 25% interest.

Usually the interest rate on bonds is paid semi-annually.

Stephen V. Lee