Treasury bill yields declined sharply at the first auction of February after investor demand exceeded the government’s target by more than 246 percent, as excess liquidity in the money market continued to weigh heavily on rates.
The fall in yields was driven by liquidity levels that significantly exceeded the Treasury’s short-term funding needs, resulting in intense competition for government securities with demand far outstripping supply.
Data from the Bank of Ghana showed that total bids amounted to GH¢17.24 billion, well above the government’s target of GH¢4.98 billion. The Treasury accepted GH¢5.83 billion of the total bids, underscoring strong appetite for short-term instruments despite declining returns.
The 364-day bill attracted the highest demand for the third consecutive week, recording GH¢6.94 billion in bids, of which GH¢2 billion was accepted. The 91-day bill drew GH¢6.57 billion in tenders, with GH¢2.52 billion taken up, while the 182-day bill received GH¢3.72 billion in bids, out of which GH¢1.30 billion was accepted.
Yields declined across all tenors on a week-on-week basis. The 91-day bill fell by 86 basis points to 9.96 percent from 10.82 percent. The 182-day bill dropped by 57 basis points to 11.81 percent from 12.38 percent, while the 364-day bill declined by 76 basis points to 12.06 percent from 12.82 percent.
Despite the compression in yields, market analysts expect strong investor participation in upcoming auctions to persist, supported by ample liquidity conditions and continued preference for the 364-day tenor, which still offers relatively attractive returns compared with shorter-dated instruments.
Analysts also project that yields could continue trending downward until they reach levels considered unattractive to investors, at which point funds may gradually shift toward equities or other higher-yielding assets.
For the next auction, the government has increased its issuance target to GH¢6.42 billion, highlighting its continued reliance on the domestic money market to meet short-term financing requirements.
By Ebenezer K. Amponsah