The government has raised GH¢1.54 billion more than planned from Treasury bills (T-bills), as investors continued to lend money to the state despite falling interest rates.

Treasury bills are short-term loans that individuals, banks and other investors give to the government. In return, the government pays interest and promises to repay the money after an agreed period, usually 91 days, 182 days or 364 days.

The government uses money raised through T-bills to meet its financing needs, including covering budget expenses and managing cash flow.

Government accepts GH¢1.77 billion of GH¢2.93 billion T-bill bids

In the latest auction, the government planned to borrow GH¢2.87 billion but accepted bids worth GH¢4.41 billion, exceeding its target by about 53.5%.

Investors offered a total of GH¢5.07 billion, indicating that they were willing to lend more money than the government initially intended to raise.

Most of the money came from shorter-term bills

The 91-day and 182-day bills accounted for about GH¢4.27 billion of the total amount raised.

Investors offered GH¢3.29 billion for the 91-day bill, of which the government accepted GH¢3.01 billion.

For the 182-day bill, investors offered GH¢1.31 billion, with the government accepting GH¢1.26 billion.

The government, however, accepted only GH¢136 million of the GH¢468 million offered for the 364-day bill, which matures after one year.

Interest rates continue to fall

The interest rates, known as yields, declined across all three types of Treasury bills.

The yield on the 91-day bill fell to 4.60% from 4.64%, while the rate on the 182-day bill dropped to 6.28% from 6.32%.

The 364-day bill yield also declined to 9.75% from 9.80%.

Yields represent the returns investors receive for lending money to the government through Treasury bills.

The decline means investors buying the bills at the latest auction will earn slightly lower returns than those who bought them at the previous auction, all else being equal.

What this means for the government

The strong demand allowed the government to raise more money than planned, even as interest rates fell.

Lower yields could help reduce the cost of government borrowing. However, the heavy reliance on the 91-day and 182-day bills means much of the money must be repaid within three to six months.

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The government may therefore need to raise more money in future auctions to repay maturing bills if it does not have sufficient funds available.

For investors, Treasury bills offer a way to earn returns over a relatively short period. For the government, they provide a means of raising funds to meet its financial obligations.

DR/MA

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