Treasury Bill borrowing hits GHS 11.26bn in May 

Government has experienced a significant increase in its borrowing through treasury bills, highlighting the challenges and volatility in the country’s financial market. In May 2023, the government borrowed a staggering GHS 11.26 billion, representing a substantial 36.57% increase compared to the previous month.

Despite the borrowing surge, the uptake managed to cover nearly all the matured bills worth GHS 11.42 billion. However, the elevated yields on the 91-day and 182-day bills, which climbed by 85 and 91 basis points, respectively, to 20.80% and 23.62%, indicate the growing risk in Ghana’s money market.

Analysts predict that the elevated yield on the Bank of Ghana’s 56-day OMO bill will likely continue to exert upward pressure on money market yields in June 2023.

May 2023 Treasury Bill Borrowing

In May 2023, Ghana’s government turned to the treasury bill market to secure funding, borrowing a significant sum of GHS 11.26 billion. This marked a remarkable increase of 36.57% compared to the previous month, reflecting the government’s growing need for financing. Despite the substantial borrowing, the uptake managed to cover the matured bills worth GHS 11.42 billion, suggesting a relatively healthy demand in the market.

Yield Surges and Market Outlook

The surge in borrowing is accompanied by a notable increase in yields on the 91-day and 182-day treasury bills. The yield on the 91-day bill rose by 85 basis points to reach 20.80%, while the 182-day bill experienced a more significant jump of 91 basis points, settling at 23.62%. This upward movement in yields highlights the heightened risk and volatility in Ghana’s money market.

Analysts are closely monitoring the situation, particularly the impact of the Bank of Ghana’s 56-day OMO bill on money market yields. The elevated yield on the OMO bill is anticipated to exert further upward pressure on money market rates in the coming months, leading to potential challenges for investors and borrowers alike.

Government Borrowing in June 2023

The government’s need for funds continued into June 2023, with a borrowing of GHS 2.4 billion from the money market. The majority of bids came from the 91-day bill, with investors tendering a little over ¢1.59 billion for the three-month instrument. The government accepted over 99% of the bids, indicating strong investor interest in the short-term treasury bills. Additionally, approximately ¢816 million was tendered by investors, primarily banks, for the 182-day T-bill, and all bids were successfully accepted.

Continued Surge in Interest Rates

Despite the government’s successful borrowing, interest rates on the money market continued to climb. The 91-day T-bill experienced an increase of 0.36% to reach 21.15%, while the 182-day T-bill rose to 23.93% from the previous week’s 23.62%. These upward movements in interest rates reflect the evolving dynamics and increased risk appetite among market participants.

Ghana’s government treasury bill borrowing has witnessed a substantial surge, highlighting the challenges and volatility in the country’s financial market. The increased borrowing, coupled with rising yields on treasury bills, underscores the growing risk and uncertainty faced by investors and the government alike. As the Bank of Ghana’s OMO bill continues to exert upward pressure on money market yields, it is imperative for market participants and policymakers to closely monitor the situation and adopt appropriate strategies to navigate the evolving market conditions.

Source: Norvanreports