T-Bills auction: Government exceeds target by 79%, but one-year yields climbs to 12.96%

The government continued to enjoy strong investor demand for its short-term debt instruments, recording another oversubscription in its latest treasury bills auction—this time exceeding its target by a remarkable 79%.

According to auction results published by the Bank of Ghana, total bids tendered reached GH¢10.5 billion, while the government accepted GH¢8.65 billion against a target of GH¢5.866 billion. The oversubscription signals sustained confidence in Ghana’s short-term sovereign paper, even as interest rates show mixed movements across the yield curve.

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The 364-Day Bill Dominates

Once again, the 364-day bill was the most sought-after instrument, attracting GH¢7.47 billion in bids—representing about 71% of the total bids tendered. The government accepted GH¢7.17 billion of that amount, reflecting a strong appetite for longer-dated short-term securities.

The 182-day bill received bids of GH¢757.9 million, with just over GH¢501 million accepted. Meanwhile, the 91-day bill drew GH¢2.27 billion in bids, of which GH¢927 million was accepted.

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Yield Movements: A Mixed Picture

Interest rates on the yield curve showed divergent trends:

· 91-day bill – Yield remained unchanged at 5.76%.
· 182-day bill – Yield edged down slightly to 7.64%, from the previous week’s 7.68%.
· 364-day bill – Yield surged by 2.0 basis points to 12.96%, marking the highest level in recent weeks.

The rise in the one-year yield is particularly noteworthy. It suggests that investors are demanding higher compensation for locking in funds for a longer period—possibly reflecting concerns about inflation expectations, currency stability, or the government’s medium-term borrowing trajectory.

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What Drives the Oversubscription?

Analysts attribute the consistent oversubscription to several factors:

1. Liquidity in the banking system – Banks and financial institutions have ample excess reserves, which they are parking in risk-free government securities.
2. Attractive risk-adjusted returns – Despite the modest yields on shorter tenors, T-bills remain one of the safest investment options in the current environment.
3. Limited alternative investment avenues – With private sector credit growth still subdued, institutional investors are gravitating toward government paper.
4. Confidence in fiscal stability – The government’s ongoing fiscal consolidation efforts have reassured investors about debt servicing capacity.

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The Fiscal Context: Borrowing to Bridge the Gap

The T-bill auction is a critical component of the government’s domestic financing strategy. With international capital markets still relatively expensive and multilateral disbursements subject to IMF programme reviews, the government has relied heavily on short-term domestic borrowing to fund its operations and service existing debt.

However, rising yields—especially on the 364-day bill—pose a double-edged challenge. While they attract investors, they also increase the cost of servicing domestic debt, which already consumes a significant portion of government revenue.

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What the Numbers Say

Security Bids Tendered (GH¢) Bids Accepted (GH¢) Yield
91-Day Bill 2.27 billion 927 million 5.76%
182-Day Bill 757.9 million 501.38 million 7.64%
364-Day Bill 7.47 billion 7.17 billion 12.96%
Total 10.5 billion 8.65 billion
Target 5.866 billion

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Implications for the Economy

The oversubscription is a positive signal of market confidence, but the rising one-year yield warrants attention. If the trend continues, it could:

· Increase the government’s interest payment burden, squeezing fiscal space for other expenditures.
· Crowd out private sector borrowing, as banks prefer higher-yielding government paper over commercial loans.
· Signal inflationary pressures, as investors demand higher returns to hedge against potential price increases.

The Bank of Ghana will be watching these developments closely, particularly as the Monetary Policy Committee assesses the balance between growth support and price stability.

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A Pattern of Strong Demand

This is not the first oversubscription in recent months. The government has consistently exceeded its T-bill targets since early 2026, reflecting a flight to safety among domestic investors. However, the growing preference for the 364-day bill over shorter tenors suggests that investors are gradually extending their horizons—a sign of improving confidence in the medium-term outlook.

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What Next?

With the 364-day yield now approaching 13%, the government faces a delicate balancing act. It must continue to meet its financing needs while avoiding a sharp escalation in borrowing costs. Future auctions will be closely monitored for any further yield increases, which could signal a shift in market sentiment.

For now, the auction results offer a mixed verdict: strong demand, but at a price that is slowly rising.

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