The interest rate is approaching 30%; Treasury bill auctions oversubscribed for 10 consecutive weeks

Interest rates approached 30% as the government treasury bill auction was oversubscribed for the 10th consecutive week.

However, with higher yields come higher costs to the government, as interest charges could likely increase.

Interest rates on the yield curve continued to climb as liquidity increased in the market.

However, returns are below the current inflation rate of 31.7% (July 2022).

Rising interest rates indicate that the government will spend more on interest payments this year. While 91-day Treasury bills rose 27.7%, higher than the previous week’s 27.3%, that of 6-month Treasury bills traded at 29.2%, against 28.7 % the previous week.

Meanwhile, the government obtained ¢1.09 billion from the sale of short-term securities, an oversubscription of about 33%.

Once again, ¢911.3 million was raised on the 91-day bill as investors were more interested in this financial instrument.

However, ¢185.82 million was obtained from the sale of the 182-day Treasury bill.

Despite improved money market liquidity, Ghana’s interest rate remains one of the highest in sub-Saharan Africa.

Rising inflation, others pose upside risk to yields

At the same time, rising inflation and the country’s credit rating downgrade pose an upside risk to yields.

Inflation accelerated to 31.7% (+190 basis points), fueled by non-food inflation, notably transport, utilities and household furniture and equipment.

Databank Research said investors would continue to expect higher returns to cover inflation-induced losses.

Ghana’s debt-to-gross domestic product ratio is expected to exceed 81% in 2022.

Securities Tenders submitted (GH¢) Bids Accepted (GH¢) Interest rate
91 day invoice 911.39 million 911.38 million 27.72%
182 day invoice 185.28 million 185.28 million 29.29%
Total 1.096 billion 1.096 billion
Target 823 million

Stephen V. Lee