The Government of Ghana will pay 29.85% for a 3-year bond issued last Thursday, July 21st, 2022.
This is coming as no surprise because interest rates on Treasury bills are presently going for a minimum of 26%.
According to the auctioning results, government secured about ¢1.11 billion, far below its target.
Joy Business understands majority of foreign investors did not participate in the sale of the debt instrument, which was originally a 5-year bond, but the tenor or maturing period was reduced to 3 years.
Some analysts believe the coupon rate of 29.85% was slightly below the secondary market levels, which were quoted above 30% by investors across the domestic yield curve.
Per the amount raised against the corresponding maturity size of ¢4.69 billion, the government was unable to meet its refinancing target. The bond maturing was a 5-year bond, but the government issued a 3-year bond to refinance the 5-year bond.
However, the investors holding the 5-year bond did not roll over for a 3-year tenor, but rather demanded repayment.
“Considering the ongoing aversion of foreign Investors to our local currency bonds, we can safely say that domestic investors significantly dominated this transaction. This is one key reason why the transaction did not meet the refinancing target because offshore investors accounted for 52% of the maturing bond. And since they opted to repatriate their maturities rather than rollover for another term, that was always going to create a shortfall in the amount raised”, an analyst who decided to remain anonymous told Joy Business.
Meanwhile, government secured $81.23 million from the 5-year domestic denominated Treasury bond due November 2026. This debt instrument was via a tap issue.
The coupon rate was 6%, lower than the initial pricing guidance of 7.25%.
The last time government issued a three year bond, it agreed to pay 25% interest.
Usually, interest rate on bonds are paid semi-annually.
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