Trading in new bonds on secondary market jumps to GHS 459m

The bond market in Ghana experienced a remarkable surge in trading activity last week, as market participants grappled with valuation challenges concerning the Payment In Kind (PIK) component of the new bonds. Despite these challenges, the total traded volumes of Ghanaian bonds jumped from GH¢117.11 million to GH¢459.34 million, indicating a substantial increase in investor interest.

Notably, most of the trading activity centred on the new bonds, which accounted for approximately GH¢398.63 million, representing a substantial 97.31 percent week-on-week rise. The trading predominantly focused on short- to medium-term papers, with notable attention given to the actively traded Feb-2027 (CPN: 8.35 percent) bond, clearing at a yield of 9.26 percent. Additionally, the Feb-2028 (CPN: 8.50 percent) bond settled at 9.42 percent.

This robust secondary market activity serves as a positive development for investors and market observers alike, who were eagerly awaiting resolution of the valuation issues. Apakan Securities expressed optimism in its market analysis, stating that they expect market activity to pick up now that the valuation issues have been resolved. This sentiment aligns with broader market expectations, as investors anticipate a more vibrant secondary market in the weeks to come. The robust trading volumes, coupled with the strong performance of short- to medium-term bonds, indicate a market poised for growth.

Turning to the primary market, rising money market yields have rekindled investor interest in government bills. Auction results from the previous week highlighted a consistent oversubscription of Treasury bills for the sixth consecutive week. Investors submitted an impressive amount of GH¢2.57 billion, surpassing the target size of GH¢1.83 billion by 40 percent.

The Government successfully sold enough Treasury bills to cover the maturing face value (FV) of GH¢1.75 billion across all the bills. Notably, the 91-day bill experienced a 31-basis-point increase, reaching 20.26 percent, while the 182-day bill rose by 12 basis points to 22.83 percent. Similarly, the 364-day bill inched up by 10 basis points to 27.36 percent.

With GH¢2.31 billion in maturing FV due next week, the Government aims to raise GH¢3.33 billion this week through the same range of bills. The differential between the target size and the maturing value stands at GH¢1.03 billion, indicating heightened financing needs by the Government in the money market. As a result, analysts anticipate that yields on Treasury bills will continue to rise in the upcoming auction, assisting the Government in meeting its financial targets.

The Ghanaian bond market is showing positive signs of growth, with the resolution of valuation issues in the secondary market and the consistent oversubscription of Treasury bills in the primary market. Market observers anticipate a more vibrant secondary market in the coming weeks, as investors continue to monitor economic indicators and potential market drivers, such as inflation readings and coupon pay-outs on selected old bonds scheduled for this week.

While the overall outlook for the Ghanaian bond market remains positive, investors are advised to exercise caution and carefully consider market risks before making any investment decisions. The Ghanaian economy continues to face several challenges, including a high level of public debt and rising inflationary pressures. Additionally, geopolitical risks and external factors, such as changes in global interest rates and commodity prices, could also impact the performance of the Ghanaian bond market in the future.

The Ghanaian bond market is a dynamic and evolving market that offers investors opportunities for growth and diversification. However, investors must remain vigilant and keep a close eye on economic indicators and market developments to make informed investment decisions.

Source: norvanreports