Investing in T-Bills: Investors told to invest with extreme caution

Director of Business Operations at Dalex Finance, Joe Jackson, has told investors – both retail and institutional – to be careful about decisions to invest in treasury bills.

Speaking during a Twitter Space Conversation hosted by norvanreports and themed “Good Investment Decisions in a Time of Turmoil”, Mr Jackson noted the high interest rates on treasury bills are too high and is a reflection of the desperation of the government to borrow more to fund its “profligate lifestyle”.

“I would advise that investors should be extremely cautious in investing in T-Bills as government is likely to include it in the domestic debt exchange programme, although the Finance Minister says it won’t. And also, the rates on the T-Bills have gone crazy, they are not sustainable.

“Investing in T-Bills is investing in a government that is desperate, the government should be reining in expenditure and not be borrowing more. Let’s not help fund their profligate nature and fiscal indiscipline,” he told host Norvan Acquah-Hayford.

Adding to the assertions of Mr Jackson, was Kenneth Thompson, CEO of Dalex Finance, who remarked that the current interest rates on T-Bills worries him and that T-Bills are not “sacrosanct” as investors have been made to believe by the Finance Minister in his assertions that the short term debt instruments will not be included in the debt exchange programme.

In his view, although funds raised from the short term debt instruments are meant to be used for short term financing challenges, the government is currently using it as its main source of financing.

Further asserting that, the country’s short term debt market is likely to crash given the high interest rates on T-Bills.

“Government is now borrowing strictly for consumption and not for anything productive that can pay for debts by itself. And by the way, T-Bills are supposed to be used to solve short term financing challenges and not a main source of financing. The government must learn to live within its means.

“The interest rates on T-Bills are unsustainable and with the way things are going, it will crash like it has done before,” he remarked.

Meanwhile, Government saw its short-term debt instruments – 91 day, 182 day and 364 day T-Bills – oversubscribed by GHS 704m.

Government, in the issuance of the debt securities beat its auction target of GHS 1,278m last Friday, January 27, 2023.

The Finance Ministry, in the issuance of the 91-day, 182-day and 364 day treasury bills mobilised a total of GHS 1,982 million in bids tendered by primary dealers.

A total of GHS 1,426m bids was tendered in for the 91-day with government accepting bids worth GHS 1,357m tendered for the short term security.

For the 182-day bill, a total of GHS 491m was tendered with government accepting all bids tendered for the debt security.

For the 364-day bill, a total of GHS 135m was tendered with government accepting bids worth GHS 134m tendered for the short term security.

The 91-day, 182-day and 364 day treasury bills were auctioned at interest rates of 35.9%, 36% and 35.9% respectively.

Source: norvanreports.com