This is reflected in the continuous oversubscription of treasury bills (T-Bills) in spite of a fall in the rate from an average of 35 per cent in late February to 19.9 per cent last week.

On March 7, the week’s offer was oversubscribed by more than 100 per cent although the rate fell from 35 per cent to 24.16 per cent.

A similar oversubscription happened on March 10 when the rate tumbled further to 19.99 per cent, the lowest in more than eight years.

Investment bank, GCB Bank Capital, said in its weekly review that the oversubscription was also a sign that the economy was awash with cedi liquidity.

It explained that this was contrary to the liquidity concerns that arose in the financial sector in the lead-up to domestic debt exchange programme (DDEP).

“The interbank market is awash with GHS liquidity underpinning the continuous oversubscription at the T-bill auctions post-DDEP.

Cognizant of the emerging risks to capital due to the accounting treatment of the new bonds, commercial banks appear to have adopted a cautious credit stance, which together with the reduced reserve requirement, has improved interbank cedi liquidity conditions,” it said.

“This highly improved cedi liquidity conditions in the financial sector amidst the limited alternative asset classes has allowed the government to narrow T-bill yields sharply towards realigning nominal interest rates,” GCB Capital said.

The domestic yield curve has been distorted, following the closure of the DDEP.

The investment bank said given the uncertain economic outlook and the attractive returns on offer on the money market, secondary bond market activity remains muted.

“The realignment of the yield curve is thus necessary for realising the interest savings from DDEP and restoring confidence in the secondary bonds market.

“Thus, despite the negative real returns, we expect the government to sustain this strategy of resetting T-bill yields in subsequent auctions, albeit gradually,” it added.