Interest rates have reached 33%; government misses treasury bill sale by 16%

Interest rates rose slightly to 33% to reflect rising inflation and the rapid depreciation of the cedi.

The rise in interest rates is however lower than the current inflation of 37.2% and the rate of depreciation of the cedi which is above 50%.

This means that the real rate of return on short-term securities for investors is always negative.

Again, the lower yields on treasury bills relative to inflation rates and the depreciation of the cedi make it unattractive for investors to buy cedi-denominated assets.

Once again, the sale of government treasury bills was undersubscribed for the second week in a row by 16%.

According to the results of the Bank of Ghana auction, the interest rate on 91-day treasury bills rose by 0.76% to 32.15%.

That of 182-day Treasury bills also reached 33.07%, against 32.23% the previous week.

The results also showed that the government obtained a total of ¢1.31 billion from the sale of short-term instruments, against a target of ¢1.56 billion.

Some market observers may attribute the under-subscription of financial instruments to liquidity problems within the economy.

Rising interest rates mean that the government will pay more for interest payments this year.

Securities Tenders submitted (GH¢) Bids Accepted (GH¢)
91 day invoice 1.142 billion 1.142 billion
182 day invoice 167.4 million 167.41 million
Total 1.309 billion 1.309 billion
Target 1.561 billion 1.561 billion

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