The Treasury plans to issue fresh cedi-denominated debts of GH¢1.95billion during this quarter – July to September 2022 – to meet government’s financing requirements, according to the issuance calendar from the Ministry of Finance.
This forms part of the gross issuance targetted amount of GH¢23billon for the period, of which about GHȼ21.12billion is to roll-over maturities.
Per this calendar, the issuance will be made through debt instruments including the 91-day and 182-day bills, which will be issued weekly; the 364-day bill will be issued bi-weekly, also through the primary auction, with settlement being the transaction date plus one working day.
Securities of 2-years up to 7-years are expected to be issued through the book-building method by the Bond Market Specialists (BMS); meanwhile, the Treasury may re-open the existing 5-year USD bond based on investors’ requests and prevailing market conditions.
Available data suggest that the dampening liquidity conditions on the money market continued to weigh on the Treasury’s auction target as of May 2022. With a target size of GH¢6.43billion in May 2022, just about GH¢4.60billion was raised from the market – a shortfall of 28 percent compared to the total auction target for the month
Since August 2021, the Treasury has on a monthly basis missed its auction target. For instance, in August last year the auction coverage ratio stood at 0.96x, declining further to 0.84x in October 2021. It however recovered gradually to 0.93x and 1.12x in January and February 2022 respectively. Since then, the auction coverage ratio has worsened in these past three months.
Lower uptake of Treasury securities by investors continued to stifle the Treasury’s ability to cover a sum maturing face value of GH¢5.49billion across 91- to 364-day bills for the month, translating into a maturity cover of 0.84x in May 2022.
However, this trend has reversed on the back of relatively more attractive yields which continued to generally support investor interest for short-term Treasuries during the end period of June 2022. Last week, investors submitted bids worth GH¢926.51million against a target of GH¢529million, but the Treasury rejected 10.7 percent of the bids due to pricing and allotted GH¢827.53million between the 91- and 182-day tenors, reflecting a bid cover ratio of 1.12x.
The proceeds were used to refinance this week’s maturing amount of GH¢496.85million, reflecting a maturity cover of 1.67x. The 91-day bill accounted for 72.2 percent of the week’s uptake.
This week, the Treasury will be seeking to sell GH¢928million in 91- to 364-day bills on Friday, July 8, 2022 to refinance GH¢821million in maturities next week. There is much expectation of a successful auction as market players continue to hunt for attractive yields at the front to the belly of the yield curve.
Last week, the secondary market was fairly active with a cumulative face value of GH¢5.67billion trading during the week – a 10 percent dip vs. the previous week. The focus of trading action remained in the front and mid-sections of the curve, with March 2023 and January 2025 dominating trading activity averagely at 29 percent coupon rate levels.
There is much expectation that investor appetite for short- to medium-term maturities will remain strong this week as the market digests government’s decision to pursue IMF support.