Strong Demand for Bank of Ghana Treasury Bills as Rising Interest Rates Influence Auction Results

The Bank of Ghana’s latest treasury bills auction, held on February 21, 2025, revealed strong demand for government securities, with GH¢20.50 billion tendered. However, the central bank accepted only GH¢9.63 billion, signaling a selective approach in managing debt issuance amidst rising interest rates. This auction’s results reflect the government’s caution as it balances demand for funds with the need to control debt servicing costs.

For the 91-day treasury bills, GH¢4.23 billion was accepted out of GH¢7.39 billion tendered, with interest rates ranging between 23.07% and 25.19%. The 182-day bills saw GH¢1.43 billion accepted from GH¢5.00 billion tendered, offering rates between 25.24% and 25.50%. The 364-day bills saw the highest demand, with GH¢3.97 billion accepted out of GH¢8.11 billion tendered, at a rate of 27.30%.

Despite the overwhelming demand, the central bank’s selective acceptance suggests a strategy aimed at avoiding excessive debt servicing costs. The rejection of a significant portion of bids may indicate the government’s focus on controlling inflationary pressures and limiting long-term liabilities, especially as interest rates continue to climb.

Looking ahead, the Bank of Ghana has set a target of GH¢6.49 billion for its next treasury bills auction, indicating the continued reliance on these financial instruments to support fiscal operations. This selective approach may persist as the central bank navigates the challenges of rising yields and fiscal management in the face of an uncertain economic environment.

SOURCE: GRAPHIC