T-bills yields record huge fall as gov’t correct anomalies

Treasury bills witnessed another high patronage even as government measures to correct interest rate anomalies pushed the yields significantly lower from the 35 percent levels.

Yields on the 91-day bill ticked lower by more than 1,000 basis points to 24.1% from a week earlier, according to the auction results by the Bank of Ghana. The 182-day fell by 850 bps to 26.5%, while the 1-year note was down 750 bps at 27.5%.

The latest drop of between 7.5% and 10%+ marks the biggest fall in a single auction in many years.

Yet, the auction was oversubscribed. The government accepted bids to GHS4.52 billion out of GHS6.15 billion tendered.

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Source: Bank of Ghana

“We expected the rates to drop, but the margin for a single auction was quite huge,” Lead Researcher with GCB Capital Courage Boti told 3Business.

The Treasury rejected all bids quoted around 35% levels in the T-bills auction last Friday and asked investors to revise down.

“We believe investors will remain robust despite the current development, which may lower appetite for T-bills slightly,” Investment firm Databank said in a market update to clients.

However, the auction saw high subscriptions as the domestic market is awash with liquidity.

“Bonds are not that attractive now, banks are conservative with loan book expansion to avoid further impairment, and that has resulted in excess liquidity on the market,” Courage Boti explained.

Total interest servicing costs for short-term instruments are expected to drop significantly as the government corrects yields on the money market. However, the huge drop may cause some distortions.

Market-watchers expect yields to drop further in subsequent treasury auctions despite inflation at a record level of 53.6 percent.

Source:3Business