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Interest rate on 91-day unchanged but others drop

Interest rate on the 91-day treasury bill did not see a change but the others saw marginal drops in their rates.

The interest rate on the 91-day treasury bill has remained steady at 24.86%, while rates for the 182-day bill have reduced marginally to 26.80% and the one-year note experienced a slight decline to 27.78%. These adjustments were anticipated following a decrease in May’s inflation rate to 21.3%, down from April’s 25%, resulting in higher real returns despite nominal rate reductions.

During the latest auction on June 21, the government aimed to borrow 3.55 billion cedis through these instruments and successfully secured 3.6 billion, slightly exceeding the target. Investors showed strong preference for the 91-day bill, accounting for 76.6% of the total borrowed amount, with the 182-day bill making up 18.3% and the one-year note only 5.1%.

The direction of the 91-day bill rate is crucial as it serves as a benchmark for setting interest rates on short-term investments and is a key factor in determining the Ghana Reference Rate (GRR), which influences loan interest rates. Analysts suggest that with one more treasury bill auction remaining in June, a potential rate reduction could lower the GRR from its current 29.44% in June, leading to decreased loan interest rates in July.

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However, given the cedi’s depreciation against the dollar by 21% over the past six months, some analysts argue that the current 24.86% interest rate on the 91-day bill may no longer be as attractive, urging the Central Bank and Government to consider potential adjustments, in order to discourage people from converting the cedis to dollars, but rather put their monies in cedi denominated investments.

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