Three bonds sold by government on Thursday, May 29, 2014 to finance some maturing debts has been heavily oversubscribed.

It however came at a high cost as government would be paying investors who participated in the bond an interest of 24.5 percent.

The bond issue which was open to offshore investors, will be the third this year.

A similar issue in April attracted a yield of 25.48 percent, the highest in three years.

Government was looking at raising GH¢300 million through the bond auction, but it had  GH¢626 million worth of bids from investors.

It however took GH¢372 million and returned the rest to the investors.

This development means that it may be difficult for commercial banks to lend money over a three year period below 24 percent.

Analyst attributes the high cost of borrowing by government to the rising inflation rate, and the depreciating cedi.

In a related development government has deferred the issuance of a seven year bond to a later date.

Although no official reason has been given for the suspension, Joy Business gathers that the fear of paying high yields on the bond might be the reason. 

A statement by the Bank of Ghana has formally confirmed the suspension of the bond.

Government paid about 18 percent on similar paper issued in November last year. 

It also paid almost 26 percent on a three-year bond issued earlier this year. 

Analyst say investors have been asking for higher interest mainly because of the rising deficit and weakening Ghana cedi.

The cancelation of the seven-year bond would affect government's current  financial position, which has been worsened by declines in  tax revenues and donor inflows.