Investors are quickly moving their money from Treasury bills to Bank of Ghana (BoG) bills, which are offering returns of around 28%.

This change is happening because the returns on Treasury bills have dropped sharply, leading to a low demand in the government’s recent auction.

According to IC Insights, a 100-basis-point increase in the policy rate will likely keep demand high for Open Market Operations (OMO) securities, making Treasury bills less appealing.

“However, the ongoing squeeze on public spending will ease the financing requirement and avert an upward reversal in T-bill rates, barring any foreign exchange shocks,” the report noted.

In the last auction, the government rejected GH¢2.37 billion worth of bids that were too high, accepting only GH¢1.69 billion out of the target GH¢4.39 billion.

This means they only accepted 40% of the GH¢4.22 billion in bills that were due, showing that there's less money available in the market.

As a result, the returns on Treasury bills dropped week by week: 6 basis points for the 91-day bills, 23 basis points for the 182-day bills, and 1 basis point for the 364-day bills, settling at 15.65%, 16.50%, and 18.84%, respectively.

The government’s decision to reject many bids shows that investors are expecting higher returns than the government is offering, especially as the government plans to reopen the bond market.

Looking ahead, the government plans to raise GH¢6.68 billion this week by selling 91-day, 182-day, and 364-day bills to refinance GH¢6.43 billion in bills that are due.