Investors shift away from T-bills as yields fall – Databank Research

By: Rebecca Okine

Undersubscriptions in Ghana’s Treasury bill market are likely to continue as investors increasingly seek assets offering higher returns, according to a new outlook by Databank Research.

The warning follows another weak performance in the first Treasury auction for July, where the government raised GHS2.96 billion, missing its GHS3.36 billion target by 11.56 percent. Despite the shortfall, the Treasury accepted all bids, which comfortably covered the GHS2.24 billion in maturing obligations.

Databank Research attributes the ongoing dip in demand to falling yields on short-term government securities and inflation, which currently stands at 13.7 percent.

“We expect continued undersubscriptions in the coming weeks as investors prefer other competitive yield securities over T-bills. With inflation at 13.7 percent, yield compression is likely to persist as the Treasury prepares to re-enter the local bond market,” the research outfit noted.

The statement suggests the government’s focus is shifting toward longer-term bonds as a means to manage debt at more affordable levels. This strategy aligns with recent efforts to restructure domestic debt and support fiscal stability.

At the most recent auction, the 91-day bill yield dropped by 13 basis points to 14.57 percent, the 182-day bill fell by 23 basis points to 15.02 percent, and the 364-day bill recorded the sharpest decline of 49 basis points to settle at 15.17 percent. These falling returns, analysts say, have eroded investor appetite for short-term debt instruments.

With real returns now offering minimal upside, given inflation’s near parity with yields, investors are turning to more rewarding options in the fixed income space and beyond.

The government is expected to re-enter the domestic bond market soon, hoping to attract longer-term investors through cost-effective instruments.

However, until yield levels improve or inflation moderates significantly, T-bill auctions may continue to face weak investor response.