The auctions to reopen the May-24 two-year (tender 1797|Coupon 21.5 per cent) and the Mar-27 5-Year (Tender 1789 |Coupon 20.75 per cent) papers were originally scheduled to take place on August 29 but were cancelled as rates skyrocketed.

GCB Capital said in its weekly market update that the initial price guidance (IPG) of around 32.5 per cent and 34.5 per cent fell significantly short of investors’ demand.

It said it expected the government to rely on the Bank of Ghana to raise the amount to be able to meet the funding demand.

Bases

In its update shared with the Graphic Business, GCB Capital said the tight monetary environment was also a factor.

“Additionally, the tighter monetary policy stance following the emergency meeting drained liquidity levels in the market.

“We believe the combination of unattractive pricing and tight liquidity conditions underpinned the weak demand for the offer,” it said.

“We expect the government to tap into central bank financing to meet this refinancing obligation in the interim, pending a market window to refinance the debt,” it added.

Auction performance

Meanwhile, the government received bids worth GH¢1.83 billion from the offer of 91-day to 364-day bills last week against a refinancing obligation of GH¢1.03 billion due August 29.

The uptake of GH¢1.826 billion exceeded the refinancing commitment for the week by 79 per cent in line with the government’s strategy of building buffers from oversubscriptions.

The 91-day bill cleared 89 basis points (bps) higher at 28.61 per cent at the auction.

The 182-day (29.94 per cent |+65bps w/w) and the 364-day (29.52 per cent |+70bps w/w) bill yields are also trekking higher – reflecting the 300bps hike in the policy rate, the lingering inflation and market uncertainties.

This week’s target

For this week, the government will offer GH¢1.72 billion across the 91-day to 364-day bills at the next T-bill auction.

The amount is needed to roll over upcoming maturities estimated at GH¢1.61 billion.

GCB Capital said it expected the 182-day and 364-day bills to cross the 30 per cent level at the next auction.

Secondary market

On the secondary market, investors moved GH¢2.26 billion across the two-year to 10-year tenors last week (+39.51 w/w).

Investor appetite concentrated around the 2023 to 2025 tenors as those sustain the short-term investor view of the market.

The trades settled at an average yield of 35 per cent.

The market appetite is rooted in the short term as investors remain on edge amid the elevated uncertainty.

LCY bond could continue the uptick amid the tighter liquidity concerns. Given the muted investor appetite for the dated tenors and no bond maturity in September, we expect the Treasury to stay short on the curve. Thus, the Treasury could sustain the strategy of picking up excess demand on T-bills to build buffers and avoid locking in high-interest costs over the medium term.