The GH¢200 million three-year bond issued by government at a 19 percent yield, to raise development resources as well as deepen the bonds market, has been oversubscribed by 97.7 percent. Total bids received for the week's offer, which closed on January 14, came to GH395.39 million of which GH310.89 million was allotted - representing 55.4 percent more than the initial amount sought. The Head of Treasury at the Bank of Ghana (BoG), Mr. Francis Kwabena Andoh who made this known in an interview with the B&FT, said the overwhelming response was an indication of the gradual restoration of investor confidence, both domestic and foreign, in the focal economy compared to a year ago. He said bid quotations received ranged between 15 and 28 percent, before drawing down to the 19 percent. He disclosed that foreigners took the biggest chunk of the offer, but could not state by how much since data is still being collated on that aspect of the issue. The bond is to be listed on the Ghana Stock Exchange (GSE) for secondary trading, which will bring. to two the number of government securities trading on the market - the other being the two-year Government of Ghana note. The last time government issued a three-year note was about one and a half years ago. Mr. Andoh said the re¬introduction forms part of efforts aimed at creating a benchmark for the Ghanaian bonds market, which has been militated against by an unfavourable macroeconomic environment. "Looking ahead into the medium ¬term, macroeconomic indicators point in a favourable direction and that is why we think it is the right time to bring it back. ''As of now the yield distribution is not normal, but we expect it to normalise getting to the end of the first quarter," Mr. Andoh said. Yield on the 91-day bill currently stands at 19.68 percent, the 182-day bill is 22.17 percent and the one-year note is going for 19.5 percent while the two-year fixed note is going for 21.0 percent. Normally distributed yields will see lower rates quoted on shorter-term dated instruments and higher rates quoted on the longer-term dated instruments. The yield on the 91-day instrument is therefore expected to fall further while that of the 182-day bill falls to levels below what is quoted on the one-year note as the yield distribution nears norma1. Mr. Andoh hinted of possible additional issues of the three-year note every quarter, and a five-year bond in June this year. "The idea is to restructure government debt-profile and reduce roll¬over costs from continual issues of government bonds," he explained. Mr. Andoh, who was confident about interest rates falling drastically in the year, dismissed any possibilities of government borrowing throwing the favourable expectations out of kilter. "It is excessive government borrowing - that is, borrowing not tied to the national budget - that disturbs macroeconomic indicators. Borrowing that is tied to the budget does not cause harm. "That aside, inflation expectation is on the low side. The BoG forecasts an average inflation rate of 10.5% for the year and an end-period target of about 9.2%. Looking at the level of commitment from government seen last year in staying within expenditure limits, all things being equal we should have a very comfortable year," he pointed out. Credit: B&FT