Treasury Bill yields drop to 20-month low amid fiscal consolidation efforts

Treasury bill yields continued their sharp decline last week, averaging between 17% and 19%—the lowest levels in 20 months.

Latest data from the Bank of Ghana reveals that the 91-day yield dropped by 307 basis points to 17.72%, down from the previous week’s 20.79%. The 182-day yield declined by 401 basis points to 18.97%, while the 364-day yield fell 271 basis points to 18.98% from 22.69%. These sustained declines reflect ongoing downward pressure on rates.

The falling T-bill rates signal a shift in the government’s borrowing strategy, as it prioritizes fiscal consolidation and explores alternative funding sources.

Despite the decline, the government exceeded its Treasury bill target, raising GHS 6.22 billion against a projected GHS 5.74 billion—an 8.4% oversubscription.

However, GHS 4.1 billion in bids were rejected as part of the Treasury’s strategy to filter out high-interest offers and reduce borrowing costs.

Investor demand remained strong, with GHS 6 billion tendered for the 91-day bill, of which GHS 4.4 billion was accepted. The 364-day bill attracted GHS 1.4 billion in bids, with GHS 947 million taken up, while the 182-day bill saw GHS 2.8 billion tendered, with GHS 842 million accepted.

Looking ahead, the Treasury aims to raise GHS 8.26 billion in the next auction.

While the continued drop in yields is expected to ease the government’s debt servicing burden and free up funds for development projects, Bank of Ghana Governor Dr. Johnson Asiama has cautioned that lower interest rates on Treasury bills could pose risks to the stability of the local currency.

He emphasized that the central bank is actively monitoring the situation and engaging in discussions with the Finance Ministry to strike a balance between reducing borrowing costs and maintaining macroeconomic stability