T-Bill Undersubscriptions Expected to Continue as Investors Seek Higher Yields – Databank Research

Investor interest in Treasury Bills (T-bills) continues to wane, with market analysts predicting further under-subscriptions in the weeks ahead. This trend follows the first auction in July, which recorded an 11.56% week-on-week undersubscription, as investors turn their attention to more rewarding investment opportunities.

Databank Research attributes this declining demand to falling yields on T-bills, coupled with Ghana’s current inflation rate of 13.7%. The narrowing gap between inflation and T-bill returns has diminished their appeal, pushing investors toward other fixed-income instruments offering better real returns.

In response, the Treasury is expected to re-enter the local bond market soon, shifting focus to longer-term debt instruments. According to Databank, this move aligns with the government’s strategy to refinance existing debt at more sustainable and cost-effective rates through longer-maturity issuances.

Last week’s auction results highlight the ongoing challenge. Total bids amounted to GHS 2.96 billion, falling short of the GHS 3.36 billion target. Despite this, the Treasury accepted all bids, which adequately covered the GHS 2.24 billion in maturing obligations, ensuring liquidity was maintained.

Yield declines were evident across all tenors in the recent auction: the 91-day bill dropped by 13 basis points to 14.57%, the 182-day bill fell by 23 basis points to 15.02%, and the 364-day bill declined sharply by 49 basis points to 15.17%. The persistent yield compression reflects broader investor caution and signals continued pressure in the short-term debt market

Source: Citi newsroom