Government Treasury Bills Oversubscribed by 144% as Interest Rates Decline Following Policy Rate Cut

Investor appetite for Ghanaian government treasuries has reached record levels, with the latest auction results showing total bids exceeding the government's target by more than 144%. Data from the Bank of Ghana reveals that investors tendered a staggering GH¢17.10 billion in bids, of which the government accepted GH¢12.3 billion. This massive surge in demand comes despite a downward trend in interest rates, signaling robust market confidence in the government's short-term debt instruments amid shifting economic conditions.

The auction saw significant interest across all tenors, with the 364-day bill emerging as the most preferred option for investors. It attracted GH¢6.54 billion in bids, representing approximately 38.2% of the total volume, with the government accepting GH¢5.9 billion. The 91-day bill received GH¢5.9 billion in bids, resulting in GH¢2.7 billion in accepted funds, while the 182-day bill saw GH¢4.6 billion in bids, with over GH¢3.5 billion accepted. This distribution shows a strong investor preference for longer-dated short-term paper.

The yield curve experienced a notable decline across the board, primarily driven by the Bank of Ghana’s recent decision to slash the monetary policy rate by 250 basis points. Specifically, the yield on the 91-day bill dropped by 37 basis points to 10.82%. Similarly, the 182-day bill yield decreased from 12.66% to 12.38%, and the 364-day bill yield eased by 24 basis points to settle at 12.82%. This downward adjustment in yields reflects the broader easing of monetary policy aimed at reducing the cost of credit and stimulating economic activity.

This significant oversubscription highlights a shift in investor sentiment as the government successfully leverages high liquidity in the financial system. While the lower interest rates reduce the government’s borrowing costs, the high volume of accepted bids indicates that institutional and retail investors still view treasury bills as a safe and attractive haven compared to other investment vehicles. Moving forward, market analysts will be watching to see if this trend of high demand persists in subsequent auctions and how it influences the government’s overall domestic debt management strategy.