Demand for Ghana Treasury bills increased strongly at the latest primary market auction, with investors submitting bids far above the amount the government initially planned to raise.

According to auction results released by the Bank of Ghana, total bids for the 91 day, 182 day and 364 day Treasury bills reached GH¢10.03 billion.

The government had targeted GH¢5.67 billion, meaning the auction was oversubscribed by about 77 percent.

In simple terms, investors offered nearly twice the amount the government was looking to borrow. This suggests that many investors continue to see Treasury bills as an attractive place to keep their money while earning interest.

The government accepted GH¢7.38 billion from the total bids submitted. This was GH¢1.71 billion higher than the original target.

Investors Preferred the 364 Day Treasury Bill

The 364 day Treasury bill attracted the highest level of investor interest.

Investors submitted GH¢5.65 billion in bids for the one year bill, while the government accepted GH¢4.53 billion.

The 91 day Treasury bill received GH¢2.98 billion in bids. Out of this amount, GH¢1.80 billion was accepted.

The 182 day Treasury bill attracted GH¢1.40 billion, with the government accepting GH¢1.06 billion.

The results show that investors placed more money in the longer dated Treasury bill, which offered a significantly higher return than the shorter tenors.

Treasury Bill Rates Record Mixed Changes

Interest rates moved differently across the three Treasury bill tenors.

The yield on the 91 day Treasury bill declined slightly to 5.86 percent from 5.87 percent in the previous auction.

The 182 day Treasury bill rate remained unchanged at 7.79 percent.

However, the yield on the 364 day Treasury bill increased by 7 basis points to 12.99 percent from 12.92 percent.

This means an investor who places money in the 364 day Treasury bill will earn a higher annual return than someone investing in the 91 day or 182 day bill.

However, the investor will also have to keep the money invested for a longer period.

Demand Improves Sharply From Previous Auction

The GH¢10.03 billion in total bids represents a major increase from the previous auction, when investors submitted GH¢4.16 billion.

This means investor demand more than doubled within one auction period.

The strong subscription may reflect increased confidence in government securities and growing demand from investors looking for relatively low risk investment options.

Treasury bills are short term government securities. Investors lend money to the government for a specific period and receive their original investment plus interest when the bill matures.

Government Targets GH¢7.36 Billion at Next Auction

The government plans to raise GH¢7.36 billion through Tender 2016.

The money is expected to support the government’s short term financing requirements, including the repayment of maturing Treasury bills and other public expenditure needs.

Investors will continue to monitor interest rates, government borrowing levels and inflation when deciding which Treasury bill tenor offers the best return.