Ghana's T-Bill market closed August with another strong showing from investors, attracting GH¢12.3 billion in bids at the final auction of the month even as the government continued to push yields lower.
Total bids submitted during August reached about GH¢60 billion, making it the second strongest month for investor demand since February, when tenders climbed to GH¢82 billion.
Government, however, did not take everything offered.
At the latest auction, it accepted GH¢6.5 billion against both an issuance target and refinancing requirement of GH¢5.1 billion, rejecting about GH¢5.8 billion of demand.
The latest result pushed total rejected bids for August to GH¢24.7 billion, sharply above the GH¢7.2 billion turned down in July.
Government Keeps Pressure on Yields
The aggressive rejection of higher priced bids reflects government’s continuing effort to reduce domestic borrowing costs despite strong liquidity in the financial system.
Weighted average clearing yields contracted by a combined 117 basis points across the curve.
The biggest movement came on the 364 day bill, where the clearing yield dropped to 10.78% from 11.59% at the previous auction.
Investors nevertheless continued to favour the longer tenor. The 364 day instrument accounted for 61% of total bids submitted, suggesting market participants remain willing to lock in current returns before any further decline in rates.
That appetite has persisted even as yields across government securities have moved lower.
Year to date net Treasury bill borrowing consequently increased to GH¢39.5 billion following the latest auction.
Liquidity Remains Firm
Money market liquidity also remained supportive.
The Bank of Ghana issued GH¢25.6 billion in 14 day central bank bills against GH¢21 billion in maturities, pointing to continued liquidity sterilisation as substantial funds circulate through the banking system.
The interaction between excess liquidity and falling yields is becoming increasingly important. Banks and institutional investors still have significant funds to deploy, but government appears unwilling to accept bids at rates it considers too high.
That has allowed borrowing costs to fall without weakening overall demand.
Next Auction Targets GH¢6.5bn
Attention now turns to the next Treasury bill auction, where government is targeting GH¢6.5 billion against maturities of GH¢4.6 billion.
If current conditions persist, yields could remain under downward pressure.
Strong investor demand, ample liquidity and expectations of further monetary easing continue to support the short end of the market.
August therefore ends with an unusual combination: investors are offering substantially more money than government needs, government is rejecting billions of cedis in bids, and buyers are still accepting progressively lower yields.
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