Yield on local currency bonds rise to 34.3%

Yields on Ghana’s cedi-denominated bonds rose to 34.3% on Wednesday, August 31, 2022.

Per some analysis done by Bloomberg, Ghana is among countries with the highest yields on their local currency bonds.

The country’s yield of 34.3% on its bond is higher than that of its peers on the continent.

Countries such as South Africa, Nigeria, Kenya and Egypt, have yields of 10.6%, 13.3%, 13.3% and 17% respectively on their local currency denominated bonds.

The rise in the country’s yield on local currency (cedi) bonds can be attributed to the ongoing exit of foreign investors from the Ghanaian economy and the sell-off of cedi-denominated bonds by investors, due to the current precarious state of the Ghanaian economy.

The hike in the country’s yield indicates increased premiums demanded by investors for the risk of holding onto the cedi-denominated junk bonds, given the risks of the Government of Ghana defaulting on its debts due to constrained fiscal space to make timely and regular interest payments.

A week ago, government reopened its 2 year and 5 year cedi denominated bonds issued on May 9, 2022 and March 14, 2022 respectively.

The two senior unsecured cedi denominated bonds issued this year, are expected to mature on May 6, 2024 and March 8, 2027 respectively.

The reopening or tap issue of the cedi bonds by government, was due to the outstanding amount of GHS 846m for the 2 year bond and GHS 1.27bn for the 5 year bond.

According to the Finance Ministry, the 2 year bond was issued at a coupon rate of 21.50% and opened to resident and non-resident Ghanaian investors.

The 5 year bond was issued at a coupon rate of 20.75% and was also opened to resident and non-resident Ghanaian investors.