In September 2023, Ghana’s domestic component of the public debt stock saw a further increase of GH¢1.64 billion. This uptick was driven by sustained demand for Treasury bills (T-bills) throughout the month.
The public debt stock had stood at GH¢473.2 billion in December 2022, equivalent to approximately 77.5 percent of the gross domestic product (GDP). However, as per central bank data, it surged to GH¢575.5 billion by June 2023.
In September, investors submitted bids totaling GH¢13.07 billion, surpassing the gross target of GH¢12.01 billion set by the Bank of Ghana (BoG) by 8.2 percent. This also marked a 10 percent increase compared to demand in August 2023.
Official data reveals that the government accepted GH¢12.88 billion from the total bids received. This amount was utilized to refinance maturing T-bills worth GH¢11.23 billion.
There were significant changes in yields across different T-bill tenors. The 91-day T-bill yield rose to 28.5 percent, a 148-basis point (bps) increase. Similarly, the 182-day T-bill yield advanced to 30.68 percent, up by 206 bps, while the 364-day T-bill yield jumped to 32.51 percent, reflecting a 127-basis point increase.
Despite a recent decrease in headline inflation observed in August, it continues to remain significantly above the upper limit set by monetary authorities. This persistent high inflation, exceeding the limit by more than ten-fold, has led analysts to anticipate that yields will not decrease in the foreseeable future.
“We foresee yields sustaining their upward trend as investors seek to further narrow inflation-adjusted losses,” noted analysts at Databank Research.
The Treasury is planning to offer GH¢2.11 billion in the upcoming T-bill auction scheduled for Friday, October 6, 2023, with the intention to refinance maturing bills totaling GH¢1.97 billion. DataBank Research believes that this lower refinancing pressure for the week may help stabilize the rising T-bill yields seen in recent auctions.
In the secondary bond market for Treasury securities, total market turnover declined significantly by 33.78 percent week-on-week to GH¢401.11 million. Trading activity favored shorter-term maturities, with the 2027 to 2030 bonds accounting for approximately 94 percent of the total face value traded. Notably, the February 2027 maturity was particularly active with a trading volume of GH¢371.02 million.
During this period, the 2027 to 2030 tenors traded at an average yield of 14.34 percent, while the 2031 to 2034 papers were exchanged at an average yield of 12.96 percent.
Market analysts anticipate that trading activity will remain robust in the coming weeks, driven by indications from the ongoing International Monetary Fund (IMF) review that suggest potential improvements in Ghana’s fiscal position, which could have a positive impact on the bond market.
“We expect trading activity to remain upbeat, as comments from the ongoing IMF review hint at an improving fiscal position,” stated Databank Research.