The T-bills market strain will likely persist in the coming weeks, according to Databank Research. Furthermore, the government faces weak bid volumes and large rollover obligations. This combination of factors should keep T-bill yields elevated near-term. Databank analysts note that the recent 2026 Budget signals heavier reliance on short-term borrowing. Consequently, the government plans to use T-bills aggressively to rebuild its cash buffers. Therefore, sustained short-term funding demand will remain a defining feature of the market. Analysts caution this aggressive strategy could push yields even higher than current levels. However, this upward pressure only happens if market liquidity fails to improve substantially in the coming months.
In addition, the exact rate at which yields adjust will depend heavily on the next movements in the Monetary Policy Rate (MPR). It also depends greatly on the broader liquidity environment. Investors currently demand much higher compensation for short-term lending risk. Since liquidity remains exceptionally tight across the financial sector, treasury financing will continue to be quite expensive for the government. This situation creates a difficult balancing act for the Treasury officials.
This warning follows another significantly underwhelming auction performance last week. The Treasury only mobilized GHS 3.83 billion. Meanwhile, the government targeted a substantial GHS 5.68 billion. This figure represents a painful 30.46% shortfall below the target. Clearly, the severe shortfall underscores persistent market liquidity tightening. Furthermore, it highlights investors’ extreme reluctance to commit funds at the government’s current offered rates. This investor hesitation occurs despite repeated, urgent attempts by the government to raise short-term funds quickly. At the same time, yields continued their noticeable upward drift across the entire short-term curve. This suggests fundamental supply and demand problems still plague the market.
Analysts suggest the coming period will prove extremely challenging. Missed targets now combine with continually rising yields and sustained, unavoidable funding needs. Ultimately, this dire situation points to significant difficulty ahead for the government’s entire short-term borrowing strategy. Nevertheless, little relief is expected in the T-bills market strain until liquidity conditions improve substantially. The government must focus on implementing effective measures quickly. These measures must successfully attract greater investment interest and restore investor confidence in short-term instruments. Consequently, a clear strategy is needed to reduce reliance on this costly form of financing. The prolonged T-bills market strain requires urgent policy intervention.
Source: JoyNews (Original Article)
