The domestic segment of the public debt increased by an additional GH¢1.64 billion in September 2023, primarily driven by sustained demand for Treasury bills (T-bills) as reported by the Treasury.
As of December 2022, the total debt stock amounted to GH¢473.2 billion, equivalent to approximately 77.5 percent of the gross domestic product. However, by June 2023, central bank data revealed that this figure had escalated to GH¢575.5 billion.
During the month of September, investors submitted bids amounting to GH¢13.07 billion, surpassing the gross target set by the Bank of Ghana (BoG) by 8.2 percent and surpassing the demand recorded in August 2023 by 10 percent.
Official data indicates that the government accepted GH¢12.88 billion from the total bids received, with these funds being allocated to refinance maturing T-bills worth GH¢11.23 billion.
Notably, there were significant alterations in yields across various T-bill tenors. The yield on the 91-day T-bill climbed to 28.5 percent, reflecting a notable increase of 148 basis points (bps). Similarly, the yield on the 182-day T-bill rose to 30.68 percent, marking a substantial 206 bps increase, while the 364-day T-bill yield surged to 32.51 percent, signifying a 127 bps increase.
Despite a recent decline in headline inflation observed in August, dropping from 43.1 percent in July 2023 to 40.1 percent, primarily attributable to a decrease in food prices, it still significantly exceeds the upper limit set by monetary authorities, surpassing it by more than ten-fold. Consequently, analysts do not anticipate a decrease in yields in the foreseeable future.
“We foresee yields sustaining their upward trend as investors seek to further narrow inflation-adjusted losses,” analysts at Databank Research said in a note.
In the upcoming T-bill auction scheduled for Friday, October 6, 2023, the Treasury is planning to offer GH¢2.11 billion. This offering is intended to refinance maturing bills totaling GH¢1.97 billion. DataBank Research anticipates that this reduced refinancing pressure for the week may contribute to stabilizing the recent upward trend in T-bill yields observed in previous auctions.
However, in the secondary bond market for Treasury securities, the total market turnover experienced a notable decline of 33.78 percent week-on-week, amounting to GH¢401.11 million. Trading activities in this market were primarily concentrated on shorter-term maturities, with the 2027 to 2030 bonds accounting for roughly 94 percent of the total face value traded. Among these bonds, the February 2027 maturity exhibited particularly active trading, with a volume of GH¢371.02 million.
Throughout this reporting period, the 2027 to 2030 tenors traded at an average yield of 14.34 percent, while the 2031 to 2034 bonds were transacted at an average yield of 12.96 percent.
Market analysts anticipate that trading activity will remain robust in the forthcoming weeks, as indications from the ongoing International Monetary Fund (IMF) review suggest the potential for improvements in Ghana’s fiscal position. Such improvements could have a positive impact on the bond market.
“We expect trading activity to remain upbeat, as comments from the ongoing IMF review hint at an improving fiscal position,” Databank Research stated.