Treasury bill rates rise above 20% as government misses auction target

Interest rates on Ghana’s Treasury bills have risen sharply, with medium and long-term short-dated securities exceeding the 20 per cent mark following the Bank of Ghana’s recent increase in its Monetary Policy Rate.

The latest Treasury bill auction saw the 91-day bill issued at an interest rate of 19.938 per cent, while the 182-day and 364-day bills were sold at 22.949 per cent and 24.463 per cent respectively.

The increase reflects the central bank’s decision to raise its benchmark policy rate to 19 per cent as part of efforts to curb rising inflation and restore stability to the economy.

The higher Treasury bill rates are expected to push commercial lending rates even higher, with average borrowing costs projected to reach about 25 per cent.

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Some banks are also expected to charge interest rates of up to 32 per cent annually for loans, depending on the borrower’s risk profile.

Despite the higher returns offered on government securities, the government narrowly missed its Treasury bill auction target.

According to the auction results, investors submitted bids worth GH¢1.157 billion, of which GH¢1.124 billion was accepted, falling short of the government’s target of GH¢1.282 billion.

The outcome suggests that liquidity conditions on the money market remain tight despite the increase in interest rates.

At the auction, the 91-day Treasury bill attracted bids worth GH¢877.5 million, all of which were accepted.

The 182-day bill received bids totalling GH¢150.54 million, with GH¢145.49 million accepted, while bids amounting to GH¢129.33 million were submitted for the 364-day bill, of which GH¢101.51 million was accepted.

Market analysts say the auction results highlight the continued pressure on government borrowing amid tighter monetary conditions and constrained liquidity in the financial sector.