Finance Minister, Ken Ofori-Atta
Investors in the domestic debt market are facing uncertainties this quarter, as the market is still awaiting the Treasury’s issuance programme for April to June this year.
The debt issuance calendar, which usually guides the market as an indicator of government debt strategy for each quarter, has been delayed by a month, breeding investor uncertainty.
In an interview with Business24, the Chief Executive Officer of Republic Securities, Kow Akyen Sackey, said the delay creates investor uncertainty regarding the positions to hold, as the issuance calendar assists with broad-based investor planning and allocation of funds available for investment.
In terms of the appetite of the issuer, Mr. Sackey said the situation “signals that government may not have a ready need for funds from borrowing.”
“No official communication has come out yet, but it is speculated that due to successful Eurobond issuances, there is enough in the coffers of government to meet the needs which expected borrowings would have funded. This delay may also be a means to check the rising debt levels,” he added.
However, checks from the Ministry of Finance indicate that the issuance calendar is yet to be approved and that investors should expect an announcement in the coming days.
During the first quarter, the Treasury issued a total of GH¢26.43 billion in securities ranging from 91-day bills to 7-year bonds.
Senior analyst with Databank Research Courage Kingsley Martey said investors are finding it difficult to form a trading and investment strategy for the quarter because they do not know what the Treasury’s issuance strategy would be, especially at a time when investors are looking forward to the Treasury’s plan to buy back expensive domestic bonds using the Eurobond proceeds.
“Consequently, what we see on the market is that investors are selling more of the longer-dated maturities to hold shorter-dated maturities. This portfolio shortening is aimed at creating some flexibility for the fund manager to take advantage of any unanticipated changes in market conditions, especially as it relates to yield uptick.”
He added: “Yields have therefore bottomed out and are looking to push up on account of the uncertainty around the Treasury’s issuance calendar.”
Nonetheless, the senior analyst said the delay could also create potential demand waiting to absorb any new offers from the Treasury when it decides to publish its plan.
Mr. Sackey noted that liquidity in the market for the past few weeks has not waned that much.
“The absence of new and rapid issuances presents an opportunity for price discovery along the various terms of securities issued,” he said.
“Brokers on the market have an important role to play here, in the sense that sourcing out holders of securities and matching them with prospective buyers will be key to maintaining interest and liquidity on the fixed income market,” he added.
The Ghana Fixed Income Market (GFIM) report for the first quarter showed that the market continued its sterling performance, recording a new all-time high traded volume of over 26 billion, breaking the previous record volume of 18bn recorded at the end of January 2021.