The treasury bill auction on July 18 saw bids of almost GH¢21 billion as fixed income investment options dried up on the market last week. The government accepted GH¢10.6 billion at rates of 13.7276%, 14.6164%, and 14.7393% for the 91-day, 182-day and 364-day treasury bill respectively. This is much lower than the 14.6596%, 15.0289%, and 15.4192% recorded in the previous auction.

With a target of GH¢5.4 billion going into the auction, the bids represent a 285% oversubscription rate. This will be welcome relief for the government as they had suffered a series of undersubscriptions over the past few auctions, with the last auction before this one even seeing an increase in interest rates.

The large volume of bids were partly driven by the lack of a Bank of Ghana (BoG) bill auction on July 16. In addition, BoG bill auctions since July 7 have cleared at rates lower than the usual 27.99% (the monetary policy rate). The last auction on July 14 cleared at 17.99%, fully 1000 basis points below the monetary policy rate.

With inflation falling to 13.7% in June and heavy expectations of a huge policy rate cut coming at the next monetary policy committee (MPC) meeting at the end of the month, investors are frantically buying up fixed income products to lock in high rates before interest rates fall across the market.

The budget reading scheduled for July 24 will provide more clarity on what the fixed income market will look like for the rest of the year.