T-bill Market shows signs of strain as investors push back on low yields

Ghana’s Treasury bill (T-bill) market is beginning to exhibit signs of investor resistance, as consecutive auction shortfalls and mixed yield movements point to growing demand for higher returns after months of policy-driven yield compression.

At the latest auction held on Friday, April 24, 2026, government fell short of its target for the second straight week. Total bids reached GH¢4.43billion, slightly below the GH¢4.48billion target, resulting in a one percent undersubscription.

Out of the bids received, the Treasury accepted GH¢3.90billion—insufficient to fully cover the GH¢4.42billion in maturing obligations. This follows a similar outcome the previous week, when demand also missed the target despite a gradual rise in yields.

The recent trend marks a shift from earlier in the year, when strong liquidity conditions and aggressive rejection of higher bids enabled government to lower yields while still meeting its financing needs.

Yields at the latest auction were mixed. The 91-day bill declined marginally to 4.92 percent, while the 364-day bill eased slightly to 10.12 percent. In contrast, the 182-day bill rose by five basis points to 6.96 percent, reflecting more selective investor participation rather than broad-based demand.

Apakan Securities, in its market commentary, noted that the mixed yield performance points to targeted investor positioning along the yield curve.

The cautious sentiment comes ahead of the next auction scheduled for April 30, where government aims to raise GH¢5.01billion to refinance GH¢4.43billion in maturing securities. Market expectations indicate that yields may edge upward.

Analysts suggest that although government borrowing needs remain relatively contained, investors may continue to demand slightly higher returns in the near term.

Throughout April, a pattern of weakening demand has emerged even as yields have begun to rise. In the preceding week, bids totalling GH¢4.49billion fell short of a GH¢4.89billion target—an undersubscription of about eight percent. Despite this, the Treasury accepted GH¢4.09billion, enough to meet maturing obligations.

During that period, yields continued their upward movement, with the 91-day bill rising to 4.95 percent, the 182-day bill to 6.91 percent, and the 364-day bill to 10.13 percent. The persistence of weak demand alongside rising yields suggests that investors are becoming increasingly price-sensitive.

This evolving market behaviour is unfolding against a backdrop of elevated liquidity in the financial system. In the first quarter of 2026, the Bank of Ghana (BoG) intensified its liquidity absorption operations, mopping up GH¢389.1billion compared to GH¢46.4billion during the same period in 2025.

Monthly sterilisation volumes exceeded GH¢100billion in each of the first three months of the year, highlighting the scale of excess liquidity—partly driven by government’s strategy of rejecting higher-yield bids to contain borrowing costs.

Overall, government received GH¢164.1billion in bids for securities in the first quarter but accepted only GH¢104.1billion, leaving nearly GH¢60billion unallocated. This surplus liquidity required central bank intervention to stabilise the market.

The policy mix contributed to a sharp decline in yields over the period. Government bond yields dropped from about 22–25 percent in early 2025 to roughly 10–13 percent by March 2026. Treasury bill rates also fell into single digits, with the 91-day bill dipping below five percent.

However, recent auction results suggest that the downward trend in yields may be nearing its limit.

As rates stabilise at lower levels, investors appear less willing to accept further declines without adequate compensation. The uptick in the 182-day bill yield, combined with recurring auction undersubscriptions, indicates that parts of the market are beginning to reprice risk.

Investor behaviour in the first quarter also showed a preference for longer-tenor instruments, particularly the 364-day bill, as participants sought to lock in yields ahead of further declines. This strategy may weaken if expectations shift toward stable or rising rates.

Meanwhile, activity in the secondary bond market has slowed significantly. Trading volumes dropped to GH¢599.24million in the latest week, down from GH¢1.69billion previously and GH¢3.61billion earlier, pointing to reduced participation and softer liquidity conditions.

Trading remains concentrated in Domestic Debt Exchange Programme (DDEP) bonds, especially in the medium-term segment. The February 2032 bond traded at a yield of 13.13 percent, while the February 2027 bond cleared at 10.06 percent. A newly issued April 2033 bond recorded limited activity at 12.09 percent.

The decline in trading volumes alongside concentrated activity suggests that liquidity, while still ample, is becoming more selective.

Implications

These developments have implications for price discovery in the domestic fixed income market. Earlier in the year, abundant liquidity supported strong trading activity and broad yield repricing. The recent slowdown suggests that this dynamic may be weakening.

At the policy level, the emerging tension highlights the challenge of balancing yield suppression with sustained investor participation. Government’s approach—rejecting higher bids to keep borrowing costs low while the central bank absorbs excess liquidity—has helped stabilise the market after the debt restructuring period.

However, if investors increasingly push back against lower yields, maintaining this balance could prove more difficult.

While it remains unclear whether domestic investors are definitively demanding higher compensation, the pattern of softer auctions, mixed yield movements and declining market activity suggests that conditions underpinning aggressive yield compression are beginning to shift.

The outcome of the April 30 auction is expected to provide further clarity on whether this trend will intensify or stabilise in the near term.

Prince Antwi

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