According to auction results published by the Bank of Ghana, every pesewa tendered by investors across the 91, 182, and 364 day maturities was accepted by the government.
This is an unusual move. The trend shows that even when the government fails to meet planned targets, some bids are typically rejected, indicating the state is not under pressure. This gives the government room to reject investor bids with high interest rates.
Some market watchers say the unusual move points to growing appetite for funds, possibly driven by rising short term financing needs. Financial analyst Mac Jordan Nartey, a Senior Research Analyst at Laurus Africa Securities, believes the move is revealing.
Accepting all bids means the government took whatever investors were willing to offer, regardless of pricing variations, suggesting stronger than usual demand for liquidity.
“What we also noted about last week’s auction is that all bids were sold out,” Nartey remarked, adding that when checking the bidding range across all tenures, the upper band has increased, signaling that the government’s appetite for money market funds has firmed up and will present upside risk.
Nartey added that the development comes at a time when Treasury bill rates are losing their shine compared to other investment options. Treasury bill rates are significantly below competitor securities on the market.
Interbank rates are moving around 21%, and the monetary policy rate is also around similar levels. These factors are driving interest away from Treasury bill assets, hence the consistent oversubscriptions.
The government’s full acceptance of bids might not just be a strategy to meet short term obligations but could reflect deeper financing pressures amid limited revenue inflows and rising expenditure commitments.
The analyst warns that if this firming up of government demand continues, it could push yields back up in coming weeks. Higher yields mean the government must pay more to borrow, which could further strain fiscal space already stretched by debt servicing costs and wage commitments.
Increased government borrowing from the money market could crowd out private sector credit, making it difficult for businesses to access affordable loans to expand operations, especially small and medium enterprises (SMEs) that rely on short term bank financing.
While accepting all bids may temporarily ease the government’s cash flow challenges, the underlying question remains how long this can be sustained without worsening the cost of borrowing or disrupting market stability.
