Despite the drop in headline inflation for July 2024, investors remain cautious on the Treasury bill (T-bill) market.
Although government will today meet its debt obligations and make coupon payments on new bonds, market observers anticipate continued cautious trading in view of government’s high demand and attractive Bank of Ghana bill yields.
new bonds. However, the overall cautious mood suggests that investors are still weighing their options carefully in response to the evolving economic landscape.
This week, the Treasury’s plan to raise GH¢5.32billion through the issuance of 91-day, 182-day and 364-day bills in the next auction – scheduled for Friday, August 23, 2024 – is being closely watched by market participants. With a GH¢5.01billion maturity due next week, pressure on the market to meet these obligations remains high.
Analysts suggest that while the inflation decline is a positive sign, continued allure of high T-bill yields may keep investors on the sidelines cautiously assessing the risk-reward balance.
In the secondary market, trading activities showed a notable rebound last week, with total volume reaching GH¢2.1billion across 127 transactions – the highest level of activity since December 2023. However, the trading was heavily concentrated on the shorter end of the local currency yield (LCY) curve, which accounted for 58.6 per cent of the total trade volume. This preference for shorter-term securities indicates that investors are still uncertain about the long-term outlook, despite the easing inflation.
Meanwhile, the bond market also saw robust demand – driven in part by the 190bps decline in inflation. Some investors shifted their focus from short-term debt to longer-dated securities, with the February 2032 bond clearing at 28.05 per cent being particularly popular. However, this shift did not reflect a wholesale return to confidence, as overall market activity, while improved, suggests a measured approach by investors.
Source: thebftonline.com
