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Government Treasury Bills Experience Slight Over-Subscription

Government borrowing through treasury bills has slowed down since the beginning of the second quarter, yet demand for the bills seems to have also decreased.

At the latest auction on Friday, May 3, 2024, patronage for government treasury bills saw a marginal over-subscription of approximately 17 percent. Initially targeting to borrow about 2.96 billion cedis, the government received slightly over 3.46 billion cedis, exceeding its target by an additional 500 million cedis.

This slight over-subscription comes after a series of undersubscribed auctions throughout April, with only one exception. Government borrowing through treasury bills has slowed down since the beginning of the second quarter, yet demand for the bills seems to have also decreased.

Of the total amount borrowed, approximately 58 percent came from the 91-day treasury bills, while the 182-day bill accounted for around 33 percent, with the one-year note making up only 9 percent. Analysts attribute this preference for shorter-dated instruments to reduced confidence in the government’s longer-dated instruments due to the challenging economic environment.

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The test of the popularity of the treasury bills will be clearer at the next auction where Government intends to borrow a higher amount of 3.67 billion cedis.

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Meanwhile, interest rates on treasury bills continue to trend downward. The rate for the 91-day treasury bill stands at about 25.45%, while the 182-day bill is going for 27.39%, with the one-year note at almost 28 percent (27.99%).

The steady decline in interest rates on treasury bills has led to a marginal decline in the Ghana Reference Rate (GRR) for the month of May to 29.66% from 29.82%. The GRR serves as the base on which banks calculate their lending rates, and the decrease could lead to a drop in interest rates on loans.

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