Foreign appetite stirs interest in short-dated bonds

… with renewed interest pushing 2030, 2031 papers to 61% of turnover

Offshore investors showed renewed interest in the domestic bond market last week, focusing on shorter-dated maturities in a development analysts say could mark a cautious re-entry of foreign capital into the domestic debt space.

Trading activity in the secondary bond market rose by 13.85 percent week-on-week to GH¢904million, up from GH¢794million in the previous week. The surge was largely driven by demand for the February 2030 and February 2031 papers, which together accounted for 61 percent of total turnover.

Despite the increase in trading, yields moved higher across much of the curve. The weighted average yield to maturity climbed 19 basis points to 16.51 percent. Yields on the 2027–2030 maturities rose to an average of 16.7 percent compared with 16.03 percent the previous week, while those on the 2031–2038 papers ended at 16.56 percent.

Databank ascribed the movement primarily to non-local actors.  “Modest offshore demand drove most of activity at the short end of the yield curve,” analysts at the bank said in a note, with international investors preferring liquid, lower-duration assets that offer exit flexibility.

Analysts say this is consistent with broader risk appetite trends, as global investors remain cautious following the recent debt restructuring exercises and are more likely to test the market through shorter-dated securities.

The renewed foreign participation coincides with signs of persistent disinflation and expectations that the Bank of Ghana (BoG) could extend its cycle of monetary policy easing at its September 2025 meeting, as a stable macroeconomic outlook – including the central bank’s gold reserves hitting 36.02 tonnes at the end of August combined with attractive real yields – has improved sentiment toward cedi-denominated debt.

At the same time, domestic institutions remain a critical driver of bond demand – particularly as government securities maintain their role as preferred collateral for repurchase agreements.

Databank observed that “confidence in these bonds sustains their role as preferred collateral for repo transactions among large institutions”, adding a layer of liquidity support to the market.

Market observers caution that while offshore activity has picked up, volumes remain modest relative to pre-restructuring levels and sustained foreign inflows will depend on the Treasury’s funding strategy and nation’s ability to consolidate its fiscal position.

Government’s larger issuance targets in the coming weeks, coupled with BoG’s open market operations, are expected to test the depth of both local and foreign demand.

Databank said that near-term sentiment is likely to strengthen on the back of disinflation, even if selective acceptance at auctions and competition from central bank bills temper outcomes.

T-bills

Meanwhile, developments in the primary Treasury bill (T-bill) market highlighted improving liquidity conditions.

The first auction in September was oversubscribed for the first time in four weeks, with investors submitting GH¢4.39billion against maturities of GH¢3.69billion. The Treasury accepted GH¢4.26billion, achieving a target coverage ratio of 1.03 times and a maturity coverage ratio of 1.18 times.

Yields on the 91-day and 182-day bills climbed to 10.42 percent and 12.41 percent respectively, while the 364-day bill edged down to 12.97 percent.

Databank attributed this outcome to a softer issuance target and improved investor appetite.

At the next auction on Friday, September 12, 2025, the Treasury will aim at raising GH¢8.29billion to settle GH¢8.07billion in maturing obligations.

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