364-day T-bills ‘hot cake’ for investors as yields reach GHC2.29bn

The Treasury market continues to show strong momentum, with investors demonstrating heightened interest in T-bills during the latest money market auction.

Bids totaled GH¢6.96 billion against a GH¢4.59 billion target, resulting in an impressive oversubscription of 52 percent, the highest weekly offer this year. This robust demand underscores investors’ appetite for higher returns, particularly in anticipation of an imminent decline in rates.

Demand for the 364-day yield reached an unprecedented high of GH¢2.29 billion, highlighting investors’ eagerness to capitalize on potentially lucrative returns offered by the 364-day yield.

Last week’s auction saw a bid-to-cover ratio of 1.02x, with GH¢117.78 million rejected while GH¢6.85 billion in bids were accepted, surpassing both the auction target and maturities.

Yields continued to decrease for the seventh consecutive week, with the 91-day T-bill experiencing a 30 basis points drop to 28 percent. The 182-day and 364-day yields also contracted by 36 bps and 40 bps, settling at 30.44 percent and 31 percent respectively.

Looking ahead, the Treasury aims to raise GH¢4.87 billion in the next auction scheduled for Friday, February 16, 2024, to refinance maturing Face Value (FV) of GH¢4.15 billion falling between the 91- and 182-day bills.

Market analysts anticipate continued downward pressure on yields in the near-term, with expectations of a receding inflation rate. However, there is a potential upside risk due to the relatively high auction target, which may be mitigated by investors’ steadfast demand for T-bills.

In contrast, the secondary bond market for government papers witnessed a slowdown, with a 16.25 percent week-on-week decline in total volume traded amounting to GH¢1.33 billion. The Feb-28 and Feb-29 papers jointly accounted for approximately 76 percent of the aggregate market turnover.

The LCY yield curve experienced a downward reversal, with the average yield to maturity (YTM) on the 2027-2030 papers decreasing to 19.13 percent and the 2035-2038 papers retreating to 17.07 percent.

Analysts attribute the sluggish performance in bond market activity to strong demand for T-bills among investors seeking higher returns amidst declining T-bill yields.

As market participants await the release of the Jan-2024 inflation figure, analysts anticipate market activity to stabilize, with investors shifting their attention to the forthcoming economic indicator.