The Domestic Debt Exchange Program (DDEP), for Daakye Trust PLC and ESLA PLC, has been reopened, but there is still ambiguity surrounding it. As a result, the market expects cautious performance from the financial markets, particularly on the primary front.Investors are eagerly expecting more information regarding the domestic debt exchange's reopening and the Bank of Ghana's (BoG) Monetary Policy Committee's (MPC) upcoming decision.

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The principal market operations are anticipated to be affected by this circumspect stance, and analysts will be closely watching developments.“We expect activity on the primary market to be moderated by the need for further clarification on reopening the domestic debt exchange, and also news surrounding the MPC meeting that started September 19, 2023,” Constant Capital mentioned in its weekly monitor.

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The government's recent announcement on September 13, 2023, regarding the reopening of its invitation to a debt exchange has further complicated market dynamics. In a statement released this week, members of the Pensioner Bondholders' Forum have rejected the government's latest attempt to involve them in the Domestic Debt Exchange Programme (DDEP).

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Similarly, the Ghana Association of Banks (GAB) declared earlier this month that its member banks will abstain from participating in any subsequent rounds of the DDEP until they receive official communication from the government confirming the program's conclusion. They expressed concerns that additional burdens on the banks could potentially lead to the collapse of their operations.

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This invitation is extended to holders of unexchanged government bonds, specifically Daakye Trust PLC and ESLA PLC, offering them new bonds. The targeted issuance size for this reopened offer is GH¢12.94 billion, with terms identical to the initial DDEP across various categories.

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This invitation is designed to support investors who may wish to liquidate these bonds before maturity, enabling them to exchange less-liquid notes and bonds for potentially more liquid ones.

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“While government will continue honouring its obligation to holders of these bonds, the evidence post-DDEP suggests the Treasury may prioritise servicing the exchanged debts amid domestic resource challenges,” GCB Capital also noted in its weekly review of the market.In the upcoming week, the Treasury is poised to refinance maturing debt with a total face value (FV) of GH¢2.41 billion in the 91- and 182-day bills.

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To achieve this, the government aims to raise GH¢2.59 billion in the next primary auction scheduled for Friday.However, last week witnessed a decrease in enthusiasm in the primary market, breaking a four-week streak of oversubscription. The Treasury managed to secure GH¢3.35 billion of its GH¢3.76 billion target, representing an undersubscription of 10.86 percent.This shortfall means that only 95 percent of the maturing face value of GH¢3.

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5 billion will be covered. As expected, yields continued to rise, with the 91-day, 182-day, and 365-day papers settling at 28.12 percent, 29.39 percent, and 32.17 percent, respectively, at the end of the auction.The previous T-bill auction saw a total demand of GH¢3.15 billion, a 7 percent increase week-on-week against a target size of GH¢3.76 billion, marking a significant 44.5 percent weekly increase. The Treasury accepted 99.

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9 percent of the tendered bids, yet this still fell 16 percent short of the auction target and 10 percent below the T-bill maturity obligation.The primary reason for this shortfall was the significantly larger target size and weekly refinancing obligation compared to the steady growth in demand. The benchmark 91-day bill reached 28.12 percent, indicating a 33 basis-points week-on-week increase.

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The 182-day and 364-day bills also saw upward movements, settling at 29.29 percent and 32.17 percent, respectively.On a separate note, the Consumer Price Index (CPI) data released last week indicated that headline inflation eased by 3 percent in August 2023. This decline comes just ahead of the MPC meeting scheduled from September 19th to 22nd.

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MPC actionExperts believe that inflation will continue to fall throughout the fourth quarter of 2023 despite residual risks to the upside from petroleum prices, mainly because of positive base drift effects.

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As a result, it is anticipated that the Monetary Policy Committee would keep its rate-neutral position throughout the rest of 2023, with a possible change of course in the first quarter of 2024 after inflation has sufficiently subsided.Investors are closely observing the Bank of Ghana MPC meeting, which is crucial to the country's economic future, for clues about how the central bank will handle these challenging market

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circumstances.

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