The government has accepted GH¢4.88 billion out of GH¢11.28 billion in bids submitted by investors at the latest Treasury bill auction, rejecting more than half of the amount offered.
The outcome reflects a more cautious approach to domestic borrowing, with the government particularly reluctant to take on expensive longer-term funds. The 364-day Treasury bill recorded the highest level of rejection, despite attracting almost GH¢5 billion in investor bids.
According to the Bank of Ghana’s results for Tender 2020, held on August 14 for securities issued on August 17, investors submitted GH¢5.07 billion for the 91-day bill, GH¢1.28 billion for the 182-day bill and GH¢4.93 billion for the 364-day bill.
Government, however, accepted GH¢4.07 billion from the 91-day bill, GH¢526.44 million from the 182-day instrument and just GH¢289.70 million from the 364-day bill.
The total accepted amount of GH¢4.88 billion was below the government’s GH¢5.99 billion target, even though investor demand exceeded the target by about 88%.
The sharpest rejection was recorded on the 364-day bill.
Investors offered GH¢4.93 billion for the one-year instrument, but only GH¢289.70 million was accepted. This means government took just 5.87% of the bids submitted for that tenor.
The pattern was markedly different for the shorter-term bills. Government accepted about 80.24% of the GH¢5.07 billion submitted for the 91-day bill and approximately 41.08% of bids for the 182-day bill.
As a result, the 91-day bill accounted for the bulk of the government’s borrowing, representing about 83.28% of total securities sold. The 182-day bill accounted for 10.78%, while the 364-day instrument made up only 5.93%.
The auction results also suggest that government was unwilling to accept bids carrying interest rates above levels it considered acceptable.
For the 91-day bill, investors submitted bids at discount rates ranging from 5.09% to 7.00%. However, bids allotted in full were limited to rates between 5.09% and 5.45%.
The weighted average discount rate settled at 5.39%, equivalent to an interest rate of 5.47%.
For the 182-day bill, bids ranged from 6.90% to 8.63%, but government limited full allotments to a maximum discount rate of 7.1360%. The weighted average discount rate was 7.02%, translating into an interest rate of 7.27%.
The government’s position was even more pronounced on the 364-day bill. Investors submitted bids at rates between 11.11% and 12.50%, but only bids at the 11.11% discount rate were allotted in full.
The resulting weighted average interest rate was 12.50%, indicating that government largely stayed away from bids demanding higher returns.
The latest auction also represents a significant decline in actual borrowing compared with the previous auction.
Tender 2019, held on August 7, attracted GH¢11.64 billion in bids and resulted in GH¢9.42 billion being sold. By comparison, accepted borrowing in the latest auction fell by about 48.17%.
However, the decline was not caused by a lack of investor appetite.
Investors still offered more than GH¢11 billion, but government chose to accept less than half of the amount submitted. This suggests that pricing, rather than liquidity or demand, was a major factor behind the lower borrowing.
The strategy could help government contain domestic interest costs if it has sufficient liquidity or alternative financing sources to avoid accepting expensive bids.
However, relying heavily on shorter-term securities also comes with a risk: it means government will have to refinance those obligations more frequently, particularly as three-month bills mature.
For now, the latest auction sends a clear message to the domestic debt market: strong investor demand does not necessarily mean government will borrow at any price.
With investors offering GH¢11.28 billion and government accepting only GH¢4.88 billion, the focus appears to be shifting from whether Ghana can raise domestic financing to how much it is willing to pay for that financing.
