Investors defy rising interest rates in Ghana's T-bills

Local investors in Ghana continue to support the government's borrowing stance despite increasing interest rates, as evidenced by this week's oversubscribed treasury bills auction. The auction attracted an oversubscription of 172 million cedis, highlighting investors' confidence in the government's financial management. Looking ahead to the next auction, the government aims to raise about 3.1 billion cedis, signaling a strong demand for short-term securities in the current market conditions. Kweku Arkoh-Koomson, an Economist at Databank, shared insights on the recent developments and his expectations for the upcoming auction. He noted that the liquidity in the market following the recent payment of coupons on new bonds contributed to the oversubscription. Additionally, investors favored the shorter end of the market due to the government's reassurance of no debt exchange or treatment, further driving demand. As the government prepares for another outing with a target of 3.1 billion cedis, Arkoh-Koomson expressed optimism about high subscription levels. However, he highlighted the challenge posed by competing open market operation bill yields, which have been rising alongside treasury bill rates. Investors may opt for bonds over T-bills due to the perceived safety of central bank guarantees. Discussing the forecast for interest rates, Arkoh-Koomson cited the current rates on various bills, with the 364-day bill at 31 percent and others ranging between 27-28 percent. He anticipated upward pressure on yields in the near term, given the government's substantial funding requirements and dependence on short-term financing for budget support. Shifting focus to the broader economic landscape, Arkoh-Koomson referenced the IMF's positive assessment of Ghana's economy, highlighting improving fiscal positions and stable exchange rates. These factors, along with investor sentiments, reflect a resilient economy responding well to IMF support. The potential disbursement of a second tranche of 600 million under the extended credit facility program hinges on Ghana's negotiations with external creditors. On the topic of external debt restructuring, Arkoh-Koomson drew parallels with favorable debt deals in other countries like Zambia and emphasized the importance of the G20 framework. He expressed confidence in Ghana reaching a deal with external creditors in the near future, pending successful negotiations. In conclusion, Arkoh-Koomson's insights shed light on the dynamics shaping Ghana's financial landscape amidst rising interest rates and external debt considerations. The government's prudent fiscal management and investor confidence are key factors driving demand for treasury bills, despite the challenging market conditions.