GCB Capital Research posits that the Government’s successful fulfillment of its GH¢2.37 billion semi-annual coupon payment has instilled a renewed sense of confidence among investors.
The government’s commitment to meeting its initial coupon obligation for the recently issued bonds through the Domestic Debt Exchange involved disbursing GH¢2.37 billion in semi-annual cash coupons, due on August 22, 2023.
Notably, the Treasury also made adjustments to the outstanding principal on these new bonds, incorporating the semi-annual Payment-in-Kind (PIK) component within the interest structure.
This accomplishment holds substantial significance in terms of revitalizing market confidence and holds the potential to gradually enhance overall market activity.
While this coupon payment isn’t expected to undo the de-recognition losses, interest haircuts, and time-value losses recorded with the older bonds, it does set the stage for a methodical recovery of impaired assets over the duration of the new bonds.
This progressive approach could notably influence banks’ financials in the latter half of 2023.
Sustaining and building upon this incremental surge in market confidence will necessitate an ongoing commitment from the government to fulfill its forthcoming obligations tied to these bonds.
Moreover, the impending closure of USD-denominated domestic bonds, alongside developments within the Pension sector and the Cocoa Bills alternative exchanges, is poised to amplify the influence of these new bonds in the market landscape.
The inclusion of pension sector holdings is anticipated to invigorate secondary bond market activity and liquidity. Anticipations are high surrounding the imminent announcement of the closure of the three alternative offers, with a strong participation rate projected across all three opportunities.
Source: Norvanreports