For the second straight week, Treasury Bill interest rates have declined following the government’s decision to reject nearly GHC 3 billion worth of bids in its latest auction. Results from Tender 1941, held on February 7, 2025, show a continued downward trend in yields, signaling the government’s commitment to easing borrowing costs by turning down expensive bids.

The auction received total bids worth GHC 10.559 billion across 91-day and 182-day bills, but only GHC 7.651 billion was accepted. Notably, unlike previous auctions, the government did not offer the 364-day bill, a move that could signal a shift in its short-term debt strategy.

The rejection of GHC 2.908 billion in bids marks a significant increase from the GHC 1.4 billion rejected in Tender 1940 (held on January 31, 2025), which led to the first decline in interest rates in three months. This aggressive stance has further driven down short-term government securities rates as the new administration continues to resist high borrowing costs.

Despite total bids exceeding the auction target of GHC 7.258 billion by 45.5%, the government’s selective approach—accepting just enough bids to meet its target—suggests a clear prioritization of cost management over simply meeting demand.

The decision not to offer the 364-day bill is particularly significant, as it implies a preference for shorter-term borrowing rather than locking in high interest rates for a full year. This could signal expectations of further rate declines in the near future or a deliberate effort to reduce immediate debt servicing costs. By suspending the 364-day bill, the government also limits investor options for higher-yielding instruments, which could drive demand toward shorter tenors and help stabilize rates.

For the 91-day bill, the weighted average interest rate fell from 28.4129% in Tender 1940 to 27.9849%, marking a noticeable decline. Similarly, the 182-day bill dropped from 28.8984% to 28.6856%. The range of bid rates also shifted downward, with the 91-day bill receiving bids between 27.8075% and 28.1001%, while the 182-day bill saw bids ranging from 28.2550% to 28.8722%.

The continued decline in rates may also be influenced by January’s inflation rate of 23.5%, which marked the first slowdown in inflation in five months. Data from the Ghana Statistical Service showed that non-food inflation dropped from 20.3% to 19.2%, easing overall price pressures. However, food inflation continued to rise, climbing from 27.8% to 28.3%, posing a challenge to the cost of living.

With inflation showing signs of easing and borrowing costs declining, the government appears to be strategically positioning itself for more sustainable debt management. The drop in interest rates aligns with expectations that lower inflation could reduce investor demand for higher yields on T-Bills.

For the next auction (Tender 1942), the government has set a target of GHC 8.068 billion, signaling its continued reliance on short-term borrowing. However, its strategy of rejecting costly bids while accepting just enough to meet its target—despite growing demand—could push rates even lower as investors adjust their pricing expectations.