Strong demand, rate cut drive Treasury yields lower

By Joshua Worlasi AMLANU & Ebenezer Chike Adjei NJOKU

Rates on domestic Treasury bills softened last week, stopping a five-week upward trend as strong investor demand combined with recent monetary policy easing to drive renewed yield compression across the curve.

The auction was heavily oversubscribed by 144 percent, with total bids of            GH¢17.11billion against an offer size of GH¢6.99billion across the 91-day to 364-day tenors. The strong turnout pointed to improving market sentiment and ample system liquidity as investors moved to lock in prevailing yields amid expectations of a gradual easing cycle.

The Treasury accepted GH¢12.31billion of the bids, comfortably covering maturities of GH¢6.81billion and allowing the government to rebuild buffers ahead of upcoming redemptions. The strong coverage demostrated sustained demand for short-term government paper despite the recent decline in yields.

Yields fell across all tenors. The 91-day bill declined by 37 basis points to 10.83 percent, while the 182-day and 364-day bills eased by 28 basis points and 24 basis points to 12.38 percent and 12.82 percent respectively. The move reflected a modest repricing at the short end of the curve, supported by persistent bid strength and improving liquidity conditions.

Market participants linked this rally to the Bank of Ghana’s recent policy shift. The central bank cut its benchmark policy rate by 250 basis points to 15.5 percent, reinforcing expectations that headline inflation – currently at 5.4 percent – will remain contained in the near-term.

Apakan Securities said the combination of policy easing and liquidity growth has materially changed investor behaviour at auctions.

“The sharp oversubscription reflects excess liquidity in the system and growing confidence that the policy rate cut marks the start of a more accommodative stance,” the brokerage said in a market note.

“Investors are increasingly comfortable extending duration at current yield levels, especially at the short end of the curve,” it added.

The firm added that the Treasury’s acceptance above maturities suggests a tactical effort to smooth near-term refinancing risks.

“By accepting more than required to cover maturities, government is taking advantage of favourable demand conditions to strengthen its cash position ahead of future redemption pressures,” Apakan Securities said.

Attention now shifts to this week’s auction, where the Treasury plans on raising                 GH¢4.98billion to refinance a gross maturing amount of GH¢4.84billion. The auction, scheduled for Friday 6 February 2026, represents a lower funding target compared with the previous week, signalling reduced near-term financing pressure.

Analysts expect demand to remain firm. Apakan Securities said the reduced offer size, combined with improving liquidity and supportive rate expectations, should allow the auction to clear comfortably.

“With demand still strong and issuance moderated, yields are likely to soften further at the margin, although the pace of compression may slow after the recent sharp moves,” the firm noted.

The easing trend has also been reflected in money market conditions with interbank rates drifting lower, reinforcing the supportive liquidity backdrop for government securities.

The renewed strength in Treasury bill demand suggests investors are increasingly aligned with the central bank’s policy direction.

While analysts caution that yields may not fall as sharply in coming weeks, the balance of risks points to continued support for short-term government paper as markets adjust to a lower-rate environment.

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