Government Overshoots T-bill Target as One-Year Yields Push Toward 13%

Ghana's government has significantly oversubscribed its latest treasury bill auction, exceeding its funding target by 73%, though yields on longer-dated instruments continue to climb, signalling persistent investor concerns about medium-term inflation and currency stability.

According to Bank of Ghana auction results, the government received GH¢10.7 billion in bids against a target of GH¢6.2 billion, accepting GH¢9.4 billion. The strong subscription underscores continued investor appetite for government short-term debt, even as borrowing costs rise across the curve.

Demand Concentrated on Longer-dated Bills

The 364-day bill remained the most heavily subscribed instrument, attracting GH¢6.0 billion in bids (55.8% of total demand), though only GH¢5.8 billion was accepted. The 91-day bill received GH¢6.0 billion in bids with GH¢5.8 billion accepted, whilst the 182-day bill drew GH¢1.9 billion in bids, of which GH¢1.1 billion was accepted.

This pattern reveals investor strategy: with the one-year yield now approaching 13%, many are willing to lock in returns over a longer period rather than roll shorter-duration bills repeatedly. The dominance of longer-dated bids suggests confidence in government debt servicing capacity, but also reflects the declining purchasing power of the cedi.

Yield Movements Signal Mixed Market Signals

The auction produced a mixed yield curve this week. The 91-day bill yield fell 14 basis points to 5.62%, whilst the 182-day yield declined to 7.52% from 7.64% previously. However, the critical longer end of the curve moved decisively upward: the 364-day bill yield surged 2 basis points to 12.98%, inching closer to the 13% threshold.

The yield compression at the shorter end contrasts sharply with the extension at the longer end, reflecting typical patterns when central banks maintain elevated policy rates. This inverted dynamic often precedes periods of economic adjustment as borrowers and savers recalibrate expectations.

Why This Matters for Ghana

Rising one-year yields have profound implications for the broader Ghanaian economy. For businesses and households, higher government borrowing costs translate into elevated lending rates at commercial banks, making it more expensive to finance investments, expansion, or major purchases. This tightening of credit conditions can dampen economic growth, particularly in sectors reliant on short-term financing.

The strong demand for bills, despite high yields, demonstrates that domestic investors—pension funds, banks, and other institutions—view government securities as safer than alternative investments. However, the climb toward 13% on one-year bills is unsustainable long-term; such rates erode government finances and signal underlying macroeconomic stress.

For policymakers, the auction results present a mixed picture. Overshooting the target by 73% suggests the government is easily finding willing lenders, reducing short-term financing pressure. However, the rising yield trajectory indicates that sustaining this approach requires ever-higher interest payments, which crowds out spending on health, education, and infrastructure development.

The Bank of Ghana's monetary policy stance—currently restrictive to combat inflation—remains the underlying driver of these yields. Until inflation stabilises and currency depreciation pressures ease, investors will demand premium rates on longer-dated instruments, keeping the cost of government borrowing elevated and limiting the authorities' fiscal flexibility.