Interest rates on Treasury bills could be falling in the coming weeks but marginally if the consistent drop in inflation is sustained.

That could also ease the cost of credit albeit slightly.

The persistent decline in inflation since July 2020 towards the Bank of Ghana’s target band of 6 to10% could create a window of opportunity to drive down treasury yields in the coming weeks.

This is because demand has exceeded supply in the last eight weeks auctioning of Treasury bills.

Interest rates on the short term securities have generally fallen so far this year due to efforts by the Bank of Ghana and the Finance Ministry to drive down yields earlier in the year.

They have been keen to drive down interest rates to reduce the cost of government borrowing as part of measures to reduce the debt service burden, which is almost 50% of total revenue.

But will this push down the Monetary Policy Rate which stands at 14.5% by next Monday, we live to see.

Meanwhile, the government exceeded its Treasury bills sale by ¢350 million during the last auctioning Friday.

It targeted ¢783 million but got ¢1.13 billion for both the 91-day and 182-day Treasury bills.

Interest rates on money market

Interest rates on the money market saw mixed developments as rates on
short to medium term instruments eased, but generally tightened at the
longer-end.

On a year-on-year basis, the 91-day Treasury bill rate declined to about 14% in August 2020 from 14.7% a year ago. Similarly, the interest rate on the 182-day instrument declined to 14.1% from 15.2%.

With the exception of the 6-year bond, yields on the 7-year, 10-year, 15-year, and 20-year bonds all increased.