The secondary bond market in Ghana witnessed a surge in activity last week, as total market turnover soared by 91.52% to ¢336.87 million, compared to the previous week.
The increase in market turnover was driven by a 92.54% rise in the volume traded across the short-dated new bonds, indicating a strong demand for fixed-income securities.
However, the local currency yield curve shifted upward, reflecting a rise in the average yield at the middle of the curve by 113 basis points. This was influenced by the Monetary Policy Committee’s decision to raise the policy rate to 30% in November, in a bid to curb inflation and stabilise the cedi.
Analysts believe that the higher policy rate could dampen market activity in the long run, as it makes treasury bills more attractive than existing bonds. The policy rate is a signalling rate that serves as a reference cap for all other rates in the economy.
According to the Bank of Ghana, the policy rate was 13.5% in May 2021, before it was increased to 14.5% in July, 16% in September and 30% in November. The bank said the rate hike was necessary to address the risks to inflation and growth outlook, amid rising global commodity prices and domestic cost pressures.
The Ghana Fixed Income Market (GFIM) is a platform that facilitates the secondary trading of all fixed-income securities, including government and corporate bonds. The GFIM offers a transparent environment where price discovery and price information are easily accessible to participants.