Last week, the Treasury market witnessed an upsurge in demand for Treasury bills, driven by improved liquidity conditions stemming from the recent GH¢2.4billion first coupon payment of new bonds from the domestic debt exchange programme (DDEP).
The heightened investor appetite for government debt instruments resulted in an oversubscription of 15 percent of the GH¢3.06billion target size, signalling growing market confidence in the economy’s outlook.
In the primary market, investors demonstrated strong interest – tendering an impressive GH¢3.53billion across the 91- to 364-day bills and surpassing the initial target. The Treasury responded by accepting all bids tendered; effectively covering a sum of GH¢2.87billion due today across all the bills, indicating a maturing cover of 1.15x.
Yields on Treasury bills saw notable increases – the 91-day bill rose by 34 basis points to 27.36 percent, the 182-day bill increased by 9 basis points to 28.71 percent and the 364-day bill experienced a substantial jump of 42 basis points to 31.66 percent.
This week, the Treasury aims to raise GH¢2.60billion across all the bills, with a focus on the 91 and 182-day bills, to cover a maturing face value of GH¢2.43billion due next week. The upcoming auction, scheduled for Friday, September 8, 2023, is expected to attract strong investor interest with the anticipation of further yield increases, albeit at a slower pace, as the demand for Treasury bills continues to intensify.
Secondary market resurgence
In the secondary market, the bond market also experienced a significant improvement last week, with total traded volume surging an impressive 204 percent to reach GH¢54.92million. The majority of trading activity was concentrated in new bonds, which accounted for 99.64 percent of the total traded volumes. Notably, the Aug-2027 bond with a coupon rate of 8.35 percent emerged as the most actively traded paper – closing at 17.82 percent.
In a significant boost for the ongoing economic recovery process, the nation successfully executed Phase II of its Domestic Debt Exchange Programme (DDEP), backed by remarkable levels of investor participation in the restructuring encompassing U.S. dollar-denominated bonds, pension funds and cocoa bills, totalling approximately US$4billion.
Government’s announcement of a 95 percent participation rate among eligible bondholders, primarily pension funds, in the exchange to tender their old bonds for new ones was met with enthusiasm. Additionally, 92 percent of eligible U.S. dollar-denominated bond holders also participated in a similar exchange. Likewise, the COCOBOD reported successful results from the restructuring of cocoa bills with an impressive 97.38 percent participation rate among eligible holders, indicating strong investor support for government’s debt management initiatives.
The improved liquidity conditions in both primary and secondary markets underscore growing investor confidence. As the demand for Treasury bills remains robust, market analysts anticipate further yield increases – reaffirming the limited options on the market.