Heavy Oversubscription Pushes Treasury Bill Yields Lower
By Nii Trebi Hammond
Treasury bill yields fell sharply at the first auction of February after overwhelming investor demand, driven by high liquidity in the money market, exerted significant downward pressure on rates.
Data released by the Bank of Ghana showed that total bids at the auction reached GH¢17.24 billion, far exceeding the government’s target of GH¢4.98 billion. Of the amount tendered, the Treasury accepted GH¢5.83 billion, reflecting strong appetite for short-term government instruments.
Demand was strongest for the 364-day bill for the third consecutive week. The tenor attracted GH¢6.94 billion in bids, with GH¢2.00 billion accepted. The 91-day bill also recorded substantial interest, drawing GH¢6.57 billion in tenders, of which GH¢2.52 billion was taken up. Meanwhile, the 182-day bill received GH¢3.72 billion in bids, with GH¢1.30 billion accepted.
Yields declined across all maturities on a week-on-week basis. The yield on the 91-day bill fell by 86 basis points to 9.96 per cent, down from 10.82 per cent. The 182-day bill declined by 57 basis points to 11.81 per cent from 12.38 per cent, while the 364-day bill dropped by 76 basis points to 12.06 per cent from 12.82 per cent.
The sharp reduction in yields was largely attributed to excess liquidity in the market, which significantly outstripped the government’s short-term funding needs. With total bids exceeding the target by about 246 per cent, analysts noted that downward adjustments in rates were inevitable.
Despite the compression in yields, market watchers expect investor participation to remain strong in subsequent auctions, supported by prevailing liquidity conditions. The 364-day bill is also expected to continue attracting preference due to its comparatively higher returns.
Analysts, however, caution that yields could continue to trend downward until they reach levels that investors find unattractive. At that point, some capital may gradually shift towards equities or other higher-yielding investment options.
Looking ahead, the government has increased its issuance target to GH¢6.42 billion for the next auction, highlighting its continued reliance on the domestic money market to meet short-term financing needs.
