Treasury Bill Yields Continue to Decline
Treasury bill (T-bill) yields in Ghana have continued their sharp decline, reaching their lowest levels in 20 months. According to the latest data from the Bank of Ghana, the average yields on T-bills now range between 17% and 19%, reflecting a significant drop in interest rates.
Breakdown of Treasury Bill Rate Changes
The latest auction results show substantial declines across various tenors:
- 91-day T-bill: Dropped by 307 basis points to 17.72% (previously 20.79%).
- 182-day T-bill: Fell by 401 basis points to 18.97%.
- 364-day T-bill: Declined by 271 basis points to 18.98% (from 22.69%).
These sustained drops highlight the government’s strategic shift toward lowering borrowing costs while managing fiscal consolidation.
Government Exceeds T-Bill Target Despite Rate Cuts
Despite the declining rates, investor appetite for government securities remains strong. In the most recent auction, the government successfully raised GHS 6.22 billion, exceeding its target of GHS 5.74 billion—an 8.4% oversubscription.
Key figures from the auction:
- 91-day bill: GHS 6 billion tendered; GHS 4.4 billion accepted.
- 364-day bill: GHS 1.4 billion in bids; GHS 947 million accepted.
- 182-day bill: GHS 2.8 billion tendered; GHS 842 million accepted.
For the next auction, the Treasury aims to raise GHS 8.26 billion, further reinforcing strong investor confidence in government securities.
Implications for the Economy and Investors
The steady decline in T-bill yields could have mixed effects on the Ghanaian economy:
Lower government debt servicing costs: Reduced interest rates ease fiscal pressure and allow more funds for infrastructure and development projects.
Risk to currency stability: Bank of Ghana Governor Dr. Johnson Asiama has cautioned that lower T-bill rates might lead to capital flight, potentially affecting the stability of the Ghanaian cedi.
The central bank is actively monitoring the situation in collaboration with the Ministry of Finance to ensure a balance between lower borrowing costs and macroeconomic stability.
What Should Investors Do Next?
With declining T-bill yields, investors may need to explore alternative investment options. Consider:
- Diversifying into bonds and mutual funds with higher yields.
- Exploring fixed deposits from commercial banks.
- Investing in Ghana Stock Exchange (GSE) securities (Visit GSE).
Final Thoughts
While falling Treasury bill rates signal a positive shift for government debt management, they also present new challenges for investors and currency stability. As yields continue to drop, staying informed and diversifying investments is crucial.
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