Interest rates on Treasury Bills have dropped for the first time in three months as the Government of Ghana rejected nearly GHC 1.4 billion in bids in its latest auction. The results of Tender 1940, held on January 31, 2025, suggest a shift in government borrowing strategy, reversing the upward trend in interest rates observed in previous auctions.

Despite receiving total bids worth GHC 9.372 billion across the 91-day, 182-day, and 364-day T-Bills, the government accepted only GHC 7.995 billion, rejecting approximately GHC 1.377 billion. The most significant rejections were in the 182-day bill, where a staggering GHC 991 million—more than 65% of total bids—was turned down. This suggests a deliberate move to control borrowing costs and manage debt servicing.

Compared to the previous auction (Tender 1939, held on January 24, 2025), where GHC 8.855 billion was tendered and GHC 8.163 billion was accepted, this auction marked a more aggressive approach in rejecting higher bids. The decision likely contributed to the decline in interest rates across all three tenors. The 91-day bill’s weighted average rate fell from 28.5153% to 28.4129%, the 182-day bill dropped from 29.0664% to 28.8984%, and the 364-day bill declined from 30.4078% to 30.3703%. While the decreases appear minor, they mark the first rate cuts in three months, potentially signaling a turning point in the market.

The range of bid interest rates also reflects this shift. The 91-day bill saw bids between 28.2999% and 28.4188%, slightly lower than the 27.3058% to 28.5600% range from the previous auction. The 182-day bill, which saw the highest rejection rate, recorded a bid range of 28.8984%, compared to 28.9501% to 29.1001% in Tender 1939. The 364-day bill saw bid interest rates between 30.3611% and 30.3710%, a slight drop from 30.1753% to 30.4269% in the previous auction. These reductions suggest the government is actively rejecting expensive bids to prevent further increases in borrowing costs.

Despite the decline in rates, demand for government securities remains strong, as evidenced by the continued oversubscription. The government had set a target of GHC 6.527 billion for Tender 1940 but ended up accepting GHC 7.995 billion, highlighting sustained investor confidence in short-term government debt. However, the widespread rejection of 182-day bids indicates that investors may have anticipated even higher rates, which the government resisted.

For the upcoming auction (Tender 1941), the government has set a higher target of GHC 7.258 billion, suggesting a continued push to drive rates lower. Whether this trend continues will likely depend on macroeconomic factors, particularly the January 2025 inflation rate, which is expected to be announced today by the Ghana Statistical Service. The inflation figure could play a key role in determining whether this marks a sustained reversal in borrowing costs or a temporary market adjustment.