Trading in local Dollar bonds soars to US$35m in five months

Trading in locally issued US dollar-denominated government bonds surged nearly fifty-fold in the first five months of 2026, with volumes rising to US$35.36million from US$739,092 during the same period last year according to Ghana Fixed Income Market (GFIM) data.

The 4,684 percent year-on-year increase marks one of the strongest rebounds in any segment of the domestic fixed-income market since the 2023 Domestic Debt Exchange Programme (DDEP) and is being interpreted by market participants as a sign of improving investor confidence in Ghana’s sovereign debt outlook.

In May alone, trading volume reached US$10.27, up from US$570,126 in May 2025 and representing a 1,701 percent increase.

The figures, published in Ghana Stock Exchange’s monthly fixed-income market report, relate to two outstanding US dollar-denominated government bonds – a four-year instrument and a five-year instrument – with a combined outstanding stock of US$791.77 million.

The volume traded between January and May implies a turnover rate of approximately 4.5 percent of outstanding stock, a level that would have been difficult to envisage at the height of post-DDEP market dislocation.

The surge is unfolding against a broader GFIM recovery that has been both fast and broad-based. Total traded value for the first five months of 2026 reached GH¢160.7 billion, more than double the GH¢79.61 billion recorded for the same period last year, driven in part by sharp yield compression across the curve.

The four-year government bond yield stood at 10.27 percent in April 2026 compared with 21.21 percent a year earlier, a repricing that is forcing portfolio reallocation as institutions which were parked at the short end or had incurred restructuring losses become willing to take on duration again.

“What you are seeing is the market repricing Ghana’s sovereign risk in real time. For most of the post-DDEP period, these instruments were essentially untouchable for any investor with a mandate to avoid distressed assets. That stigma is lifting,” said Ebenezer Yaw Odoom, Financial Analyst at Constant Capital.

The DDEP, which was primarily a Ghana cedi restructuring, effectively paralysed secondary market activity across much of the domestic bond market as investors reassessed risk exposures and institutions adjusted to the new debt structure.

The local dollar bonds, which were largely outside the restructuring’s scope, offer investors protection from cedi depreciation while retaining exposure to sovereign credit and have remained among the instruments most closely watched by both domestic and offshore investors considering a return to Ghanaian assets.

Odoom describes the surge as less a recovery in an established market than the early emergence of one – the distinction being that the local US dollar bond segment never developed deep roots before the DDEP disrupted it and what is now being built is effectively new ground.

“Twenty-five million dollars in five months across a two-instrument segment is not a deep market, it is a market that is beginning to develop,” he said.

“The question for 2027 and beyond is whether government could consider expanding the local USD issuance programme and whether pension funds and insurance companies will be permitted or incentivised to allocate more for the segment,” he added.

The financial analyst also notes that domestic investors may be using the local US dollar bonds as a proxy for their pre-crisis interest in Ghana Eurobonds, an appetite that was curtailed by the debt restructuring.

The identities of investors behind the surge are not fully disclosed in public data, although trading records point to a mix of commercial banks and broker-dealers. In May, Absa Bank Ghana and Access Bank Ghana accounted for 26.52 percent and 25.36 percent of total volume respectively, while Black Star Brokerage and First Atlantic Bank each contributed 23.67 percent.

For the January-to-May period, Black Star Brokerage dominated activity with 51.36 percent of total traded volume – followed by Absa Bank at 25.96 percent and Access Bank at 10.23 percent.

The prominence of broker-dealers is notable because such institutions typically execute trades on behalf of pension funds, asset managers and other institutional investors rather than for proprietary portfolios.

Odoom said the broker-dealer presence points to genuine end-investor demand rather than interbank balance-sheet repositioning.

“If a broker-dealer shows meaningful volume in an instrument, it almost always reflects underlying client orders – typically pension funds, asset managers, insurance companies or high-net-worth clients seeking portfolio diversification or dollar-hedging,” he said.

The concentration of activity in one or two broker-dealers, he added, also raises a structural flag: the US dollar bond segment is not yet a competitive, multi-participant market. “That is only a starting point, not a deep story in dollar bond segment’s growth,” he noted.

This resurgence in activity coincides with a broader improvement in the domestic macroeconomic environment. Inflation was reported at 3.7 percent in May 2026, reserves cover nearly six months of imports and the cedi has broadly stabilised.

Ghana formally exited the IMF Extended Credit Facility in May 2026 and will continue under a non-financing Policy Coordination Instrument; in Odoom’s assessment, a signal that stabilisation is being institutionalised rather than abandoned. Against that backdrop, local dollar bonds offer a relatively attractive proposition for investors seeking exposure to Ghana’s recovery while retaining a degree of protection against exchange-rate risk.

However, market participants caution that liquidity remains shallow despite the surge in trading. The entire segment consists of only two outstanding instruments with a combined value of US$791.77million.

Moreover, the US$10.27million traded in May was executed through just ten transactions, implying an average trade size of slightly more than US$1million.

Odoom identified several structural constraints that compound each other. The first is a feature specific to how the instruments are issued: each bond is split into a Foreign Exchange Account (FEA) series and a Foreign Currency Account (FCA) series, with investors only able to subscribe using funds from the corresponding account type.

Critically, investors cannot convert cedis into dollars to purchase the bonds as the investment must be funded with existing eligible foreign currency balances. This design deliberately prevents the bonds from generating additional foreign exchange demand, but it also narrows the eligible investor base.

Instrument scarcity compounds the problem

Two bonds with a combined outstanding below US$800million are not sufficient for institutional investors to construct meaningful positions or trade against peers. “Government would have to, if policy permits, issue consistently across maturities to build a local US dollar yield curve,” Odoom noted.

Thin secondary liquidity reinforces this, as ten trades moving the full May volume means no price continuity, no reliable mark-to-market and no standardised bid-ask spread.

“Until there are multiple active market-makers, not just one or two dominant broker-dealers, trading in the dollar bonds will remain episodic rather than liquid,” he noted.

Neither the Bank of Ghana nor the Ministry of Finance has publicly indicated whether additional local dollar-denominated bonds will be issued.

Odoom’s noted positive developments, as managers of the economy have restructured sovereign debt, maintained an IMF programme through a political transition and rebuilt macro-credibility faster than most analysts expected – with sovereign ratings recovering from restricted default to a B rating with a positive outlook through five consecutive upgrades and GDP growth at or above 6 percent for two consecutive years and Q1 2026 printing at 6.4 percent. But the capital market, he argues, has not yet caught up with the macroeconomic changes.

Domestic pension funds hold over GH¢90billion in GFIM assets, yet corporate bond trading remains below one percent of total market volume.

“That gap, between the size of captive institutional money and the diversity of instruments they can invest in, is a defining structural problem in the market,” he said.

Prince Antwi

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