In a press statement issued by the Public Affairs Department of the Ministry of Finance Wednesday, August 28, 2019, the government said although the amount received in bids was less than the targeted amount, the nature of the issue did not require that the full amount of GH¢450 million be raised once.

As a result, it said “contrary to the articles published, this was not a failed or under-subscribed offering but a fairly priced offering that has established another data point along our yield curve.”

The statement said prior to the issuance, “we were aware that given the current market conditions and the limited appetite for longer-dated bonds, the size of the debut issue was unlikely to be of a benchmark size, and that was the reason it was structured as a shelf offering so additional issuances could be done overtime to reach the targeted GH¢450 million benchmark level.”

In the statement copied to Graphic Online, the ministry said the government set out primarily to elongate the country’s debt tenor and yield curve by issuing a 20-year bond for the first time in the country’s history.

This was also to help deepen the domestic market and improve liquidity through the issuance of benchmark size bonds that will be sizeable enough for investors to trade in and out, it said.

It said the trade in and out would then create liquidity, better price discovery or pricing and deepen the secondary market.

“It was in line with this strategy that the Government of Ghana in consultation with the Joint Book Runners (JBRs) and investors decided to issue a 20-year bond through a shelf offering to extend the tenor and the yield curve from 15 years to 20 years,” it explained.
The shelf offering approach allows an issuer of a security to sell multiples of a registered debt.

The issuance of the 20-year bond raised GH¢162.1 million, less than 40 per cent of the targeted amount.

The bond was priced at 20.2 per cent. Prior to its issuance, the 15-year bond was the country’s longest debt instrument.

The statements aid the strategy was consistent with the government’s 2019 Annual Borrowing Plan and 2019 Medium Term Debt Strategy of issuing longer-dated bonds beyond 10 years to extend the yield curve further.

“It is also consistent with our efforts to deepen the domestic debt market by building benchmark securities through tap-ins, rather than excessive new issuances.

“It is also part of our strategy to re-profile the domestic debt portfolio by reducing the percentage of shorter-dated instruments of 91 and 182-day bills, which dominates our bond market and increases rollover risks,” it added.