Investors intensify appetite for Ghana’s T-bills

Investors are intensifying their appetite for Ghana's Treasury bills as the market experiences a strong performance in the second half of the year. Courage Martey, a Senior Economist at Data Bank Group, provided insights into the market dynamics in a recent interview on CNBC Africa. The first half of the year posed challenges for the market as inflation surged, leading to negative real returns and reduced investor confidence. The central bank responded with aggressive monetary tightening, further tightening liquidity. This scenario resulted in a lack of interest in the Treasury bills market, leading to underperformance in government auctions. However, as the second half of the year unfolded, improvements started to emerge despite ongoing inflation pressures. The gap between inflation and T-Bill yields narrowed, attracting investors back to the market. Investors shifted from bonds to short-term papers like Treasury bills, seeking better returns relative to inflation. While uncertainties persist around inflation and rising costs, the outlook for the remainder of the year remains cautious. Elevated yields are expected, with T-Bills approaching the mid to late 20% range and bonds inching towards the 30% mark. Monetary policy faces constraints due to aggressive liquidity tightening measures and disappointing GDP growth in the first quarter. The central bank may consider a moderate policy rate hike of 100 to 150 basis points or opt to maintain the rate, monitoring inflation trends closely. The Ghanaian Cedi is under pressure due to limited foreign exchange reserves and delayed syndicated loan approvals. The currency remains vulnerable to depreciation, with demand outstripping available supply. Without immediate intervention through syndicated loans, the Cedi's depreciation may persist, warranting potential policy adjustments by the monetary policy committee. Overall, the Ghanaian Treasury bills market shows resilience amidst economic challenges, attracting investor interest despite inflation concerns.