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Investor confidence restored as 3-year bond is
oversubscribed
By Masahudu Ankiilu Kunateh, Ghanadot
Accra, Jan 26, Ghanadot - The GH˘200 million three-year bond
issued by government at a 19 percent yield, to raise
development resources as well as deepen the bonds market,
has been oversubscribed by 97.7 percent.
Total bids received for the week's offer, which closed on
January 14, came to GH395.39 million of which GH310.89
million was allotted - representing 55.4 percent more than
the initial amount sought.
The Head of Treasury at the Bank of Ghana (BoG), Mr. Francis
Kwabena Andohsaid the overwhelming response was an
indication of the gradual restoration of investor
confidence, both domestic and foreign, in the focal economy
compared to a year ago.
He said bid quotations received ranged between 15 and 28
percent, before drawing down to the 19 percent.
He disclosed that foreigners took the biggest chunk of the
offer, but could not state by how much since data is still
being collated on that aspect of the issue.
The bond is to be listed on the Ghana Stock Exchange (GSE)
for secondary trading, which will bring. to two the number
of government securities trading on the market - the other
being the two-year Government of Ghana note.
The last time government issued a three-year note was about
one and a half years ago.
Mr. Andoh said the re¬introduction forms part of efforts
aimed at creating a benchmark for the Ghanaian bonds market,
which has been militated against by an unfavourable
macroeconomic environment.
"Looking ahead into the medium ¬term, macroeconomic
indicators point in a favourable direction and that is why
we think it is the right time to bring it back.
''As of now the yield distribution is not normal, but we
expect it to normalise getting to the end of the first
quarter," Mr. Andoh said.
Yield on the 91-day bill currently stands at 19.68 percent,
the 182-day bill is 22.17 percent and the one-year note is
going for 19.5 percent while the two-year fixed note is
going for 21.0 percent.
Normally distributed yields will see lower rates quoted on
shorter-term dated instruments and higher rates quoted on
the longer-term dated instruments.
The yield on the 91-day instrument is therefore expected to
fall further while that of the 182-day bill falls to levels
below what is quoted on the one-year note as the yield
distribution nears norma1.
Mr. Andoh hinted of possible additional issues of the
three-year note every quarter, and a five-year bond in June
this year.
"The idea is to restructure government debt-profile and
reduce roll¬over costs from continual issues of government
bonds," he explained.
Mr. Andoh, who was confident about interest rates falling
drastically in the year, dismissed any possibilities of
government borrowing throwing the favourable expectations
out of kilter.
"It is excessive government borrowing - that is, borrowing
not tied to the national budget - that disturbs
macroeconomic indicators. Borrowing that is tied to the
budget does not cause harm.
"That aside, inflation expectation is on the low side. The
BoG forecasts an average inflation rate of 10.5% for the
year and an end-period target of about 9.2%. Looking at the
level of commitment from government seen last year in
staying within expenditure limits, all things being equal we
should have a very comfortable year," he pointed out.
Ghanadot
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