Bond market slows but demand remains strong

Trading activity on Ghana’s secondary bond market slowed during the past week, with total market turnover declining by 12.20 percent to GHS1.16 billion, according to market data.

Despite the dip in volume, the market recorded modest price gains across bonds in the General Category, signaling a return of investor confidence amid improving macroeconomic fundamentals.

Shorter Tenor Bonds Dominate Market Turnover

The short-dated bonds, typically viewed as lower risk due to their proximity to maturity  dominated trading activity last week, accounting for 49 percent of total market volumes. These shorter tenor instruments continued to attract strong interest from investors seeking quick returns amid falling yields.

The weighted average yield to maturity (YTM) for this segment eased 145 basis points to settle at 20.63 percent, indicating a general reduction in the cost of borrowing for government securities on the short end of the curve.

Meanwhile, the belly and tail end of the LCY (local currency yield) curve, which represent medium- and long-term bonds, accounted for the remaining 51 percent of market volumes. Yields here also moderated slightly, with the average YTM closing the week at 20.44 percent.

Improved Sentiment and Outlook

Market analysts at Databank Research expressed optimism about the short-term outlook of the domestic bond market, pointing to positive fiscal and external developments.

“We expect bond market pricing to strengthen further in the near term,” Databank stated in its weekly fixed-income commentary.

The research firm cited recent World Bank budget support disbursements, which are expected to shore up government liquidity, and the upcoming August 2025 coupon payments as key drivers that could help sustain bond market stability.

The anticipated inflows are expected to ease fiscal pressures and improve payment assurance for investors in government debt instruments a crucial development amid Ghana’s post-debt restructuring recovery phase.

Macroeconomic Context

Ghana’s bond market has experienced notable recovery in recent months, following the completion of domestic debt exchange programs and continued progress under the IMF Extended Credit Facility (ECF).

Investor sentiment has been buoyed by the government’s efforts to restore macroeconomic stability, including better-than-expected foreign reserve accumulation, falling inflation, and a relatively stable cedi.

With additional multilateral support expected in the coming months, analysts believe the bond market could continue to benefit from improved liquidity and investor appetite — especially if inflation and fiscal consolidation trends remain on track.

Conclusion

While the decline in weekly trading volumes may reflect profit-taking and cautious repositioning by some investors, the broader sentiment remains positive. The ongoing fiscal reforms, donor support, and macro stability are likely to keep the Ghanaian bond market attractive to both domestic and foreign investors in the second half of the year.