November 2024, the government raised GH¢21.5 billion through its Treasury bills (T-bills) auction, falling short of its initial target

   In November 2024, the government raised a total of GH¢21.5 billion through its Treasury bills (T-bills) auction, falling short of its initial target of GH¢22.8 billion. Although the amount raised fell below the target, the government successfully allocated all bids, exceeding its refinancing obligation by 8.3%. However, despite this, the amount raised was still 5.5% lower than the set target. This shortfall is particularly concerning as the refinancing obligation is expected to increase further in December 2024, reaching GH¢26.1 billion.

Despite the shortfall in total revenue raised, the demand for Treasury bills in November showed significant growth. Investor demand for T-bills rose by 27.2% month-on-month, signaling an uptick in interest in government securities. However, even with this increased demand, it was still not sufficient to meet the high auction target for the month, suggesting that future auctions may continue to face challenges in meeting the government’s funding needs.

In line with the growing demand, T-bill yields continued to rise in November 2024. Yields across the various tenors increased by an average of 90 basis points (bps), primarily driven by heightened inflation concerns and sustained borrowing pressure on the government. This increase in yields reflected investor sentiment, which was shaped by renewed near-term inflation uncertainty and persistent concerns about the government’s fiscal position.

The 91-day T-bill experienced the steepest rise, with its yield climbing by 100bps to reach 27.2%. Meanwhile, the yields on the 182-day and 364-day T-bills also saw increases, climbing by 70bps and 85bps, respectively, to reach 28.0% and 29.8%. These increases reflect a market environment where inflation and borrowing pressures are key drivers, leading investors to demand higher returns to compensate for the risks involved.

For investors looking for higher liquidity while still seeking a reasonable return, analysts have suggested that the 182-day tenor may be the most attractive option. This is due to its more favorable risk-return profile, especially compared to the 364-day tenor. The longer duration of the 364-day T-bill carries more duration risk, which could offset the return provided by the higher yield.

Despite the growing demand for T-bills in November 2024, the overall results of the auction highlight the challenges the government faces in meeting its ambitious funding targets. While the government has succeeded in meeting its refinancing obligations, the shortfall in meeting its overall target indicates that it may need to adjust its expectations or look for alternative funding sources to cover the increased refinancing needs in December.

The increase in T-bill yields, while reflecting higher demand, also points to a more challenging borrowing environment for the government. As inflationary pressures persist and government borrowing needs rise, yields are likely to remain elevated, further pushing up the cost of borrowing for the state. In this context, the government’s fiscal strategy will need to adapt to ensure that its financing needs are met while also keeping borrowing costs manageable.

Overall, the November 2024 T-bills auction underscores the government’s ongoing struggle to meet its funding targets amid rising inflation and fiscal challenges. While investor demand is on the rise, it remains insufficient to fully meet the government’s auction objectives. As the refinancing obligations continue to grow, the government will need to explore more sustainable strategies to secure the necessary funding and maintain fiscal stability.