Treasury bill rates have fallen since the beginning of April, to the disappointment of some investors who have (rightly) been increasing their allocation to fixed income products. Let’s take a look at the yield curve courtesy Absa Ghana’s trading desk.

As you can see, rates have fallen across board or at least stayed the same. However, demand has not fallen. Results of the BoG auction on April 17 showed bids of GH₵688 million tendered with GH₵492 million accepted for the 91-day treasury bill. It also showed bids of GH₵69 million tendered with GH₵17 million accepted for the 182-day t-bill.

In times of crisis, investors are wont to move to safe investments like treasury bills and government bonds. It is only normal therefore that the yields on such investments will fall. In essence, the government is charging a premium for offering you guaranteed returns in a period in which nothing is guaranteed.

However, this does not happen in every case. In the case where investors pull out funds and abandon the fixed income market, the yields will increase as government tries to retain investors. The fact that Ghana’s yields are falling despite the huge deficits expected from government’s fiscal response to the devastation caused by COVID-19 is indicative of a lingering confidence in the economy.

If you are worried about the reduced returns in your portfolio because of the reduced interest rates, consider it as payment now for potentially higher returns whenever the economy recovers from the COVID-19 shock.