The latest Treasury bill (T-Bill) auction (Tender 1947, held on March 21, 2025) saw a continued decline in interest rates, even as the government rejected GH¢1.67 billion in bids despite an 18.68% undersubscription. The auction results indicate that the government remains firm on lowering borrowing costs, refusing bids that did not meet its pricing expectations.

The auction attracted GH¢4.99 billion in total bids, falling GH¢1.15 billion short of the GH¢6.14 billion target. However, the government accepted only GH¢3.32 billion, rejecting nearly one-third of the total bids, maintaining its aggressive stance on interest rate reductions, even amid weakening investor demand.

The 91-day bill, which received the highest number of bids (GH¢3.63 billion), saw its interest rate decline to 15.7353%, down from 15.8624% in Tender 1946. The 182-day bill’s rate fell to 17.3317%, compared to 17.8326% in the previous auction, while the 364-day bill recorded the steepest decline, dropping to 18.8496%, from 19.1343%.

While these rates reflect the government’s strategy of pushing down yields to reduce its debt servicing costs, the continued decline in rates may be contributing to the drop in investor participation, as seen in the GH¢4.3 billion reduction in total bids compared to Tender 1946.

With inflation still elevated at 23.1%, Treasury bill yields remain well below inflation, leading to negative real returns for investors. This dynamic has sparked concerns that sustained rate declines may dampen investor appetite, forcing the government to balance its borrowing needs with maintaining an attractive investment climate.

The 18.68% undersubscription signals that some investors may be holding back cash, anticipating either a correction in rates or alternative investment opportunities.

Meanwhile, all eyes will be on the Bank of Ghana’s Monetary Policy Committee (MPC), scheduled to meet this week. While the general expectation is a cut in the current policy rate of 27.0%, the degree of the cut would certainly have implications for T-Bill rates in the coming weeks.

For the next auction (Tender 1948, scheduled for March 28, 2025), the government has set a lower target of GH¢5.64 billion, an indication that it may be adjusting its expectations in response to market trends.