T-bill auctions show emerging investor pushback

By Joshua Worlasi AMLANU & Ebenezer Chike Adjei NJOKU

The Treasury bill (T-bill) market is beginning to show signs of investor resistance, with repeated auction shortfalls and diverging yields suggesting that domestic participants may be demanding higher compensation after months of policy-driven yield suppression.

The most recent auction, on Friday, April 24, 2026, missed its target for a second consecutive week with bids totalling GH¢4.43billion against a GH¢4.48billion target, resulting in a one percent undersubscription. The Treasury accepted GH¢3.90billion, falling short of the GH¢4.42billion in maturing obligations. This outcome follows a similar pattern the previous week, when demand also came in below target despite rising yields.

The shift in auction performance marks a departure from conditions earlier in the year, when strong liquidity and aggressive bid rejections enabled government to compress yields while still meeting financing needs.

Yields in the latest auction were mixed, with the 91-day and 364-day bills declining marginally to 4.92 percent and 10.12 percent respectively while the 182-day bill rose by five basis points to 6.96 percent – ostensibly on more selective investor behaviour rather than broad-based demand.

“Yields were mixed, indicating selective investor positioning across the belly of the curve,” Apakan Securities said in its commentary on the development.

The pattern is consistent with emerging caution ahead of the next Treasury bill sale scheduled for April 30, when government plans to raise GH¢5.01billion to refinance GH¢4.43billion in maturing securities. Market guidance suggests yields may edge higher.

“Although government demand for funds remains moderated, we anticipate a slight increase in yields at the upcoming auction,” the firm noted.

The recent auction outcomes reinforce a trend observed through April, wherein demand has softened even as yields began to rise. In the prior week, total bids of GH¢4.49billion fell short of a GH¢4.89billion target… an eight percent undersubscription. Despite that, the Treasury was able to meet maturities by accepting GH¢4.09billion.

At the same time, yields extended their upward movement with the 91-day bill rising to 4.95 percent, 182-day to 6.91 percent and 364-day to 10.13 percent. The persistence of weak demand despite higher yields suggests that investor appetite is becoming more price-sensitive.

This evolving behaviour comes against the backdrop of a liquidity-driven market structure that has defined the domestic fixed income environment in 2026. The Bank of Ghana (BoG) has significantly expanded liquidity absorption operations, mopping up GH¢389.1billion in the first quarter alone compared with GH¢46.4billion a year earlier.

Monthly sterilisation volumes accelerated sharply, exceeding GH¢100billion in each of the year’s first three months. The scale of these operations reflects elevated excess liquidity in the financial system, partly generated by government’s strategy of rejecting higher-yield bids to maintain lower borrowing costs.

In the first quarter, total bids for government securities reached GH¢164.1billion but only GH¢104.1billion was accepted, leaving nearly GH¢60billion unallocated. This gap effectively injected liquidity back into the system, requiring central bank intervention to absorb it.

The policy mix contributed to a broad decline in yields. Government bond yields fell from around 22 – 25 percent in early 2025 to approximately 10 – 13 percent by March 2026, while Treasury bill rates dropped into single-digit territory – with the 91-day bill below five percent.

However, recent auction dynamics suggest that this yield compression may be approaching its limits.

As yields stabilise at lower levels, investors appear less willing to accept further declines without compensation. The 182-day bill yield’s rise, alongside continued auction undersubscriptions, pointing to parts of the market beginning to reprice risk.

Investor allocation patterns in the first quarter showed a tilt toward longer-duration instruments, particularly the 364-day bill, as participants sought to lock in yields before further declines. But this strategy becomes less attractive if expectations shift toward stable or rising rates.

The secondary bond market is also showing signs of adjustment. Trading volumes declined sharply in the latest week to GH¢599.24million from GH¢1.69billion, extending a downward trend from an earlier level of GH¢3.61billion. The drop reflects weaker participation and softer liquidity conditions.

Activity remains concentrated in Domestic Debt Exchange Programme (DDEP) bonds, particularly in the medium-tenor segment. The February 2032 bond traded at a yield of 13.13 percent, while the February 2027 bond cleared at 10.06 percent. A newly issued April 2033 bond recorded limited activity at 12.09 percent.

The concentration of trading and decline in overall volumes suggest that liquidity is becoming more selective, even as aggregate system liquidity remains elevated.

Implications

This shift has implications for price discovery. Earlier in the year, excess liquidity supported strong secondary market turnover and facilitated a broad repricing of yields. The recent slowdown indicates that this mechanism may be weakening, with funds not circulating as actively through the market.

At a policy level, this emerging tension reflects the interaction between yield suppression and market participation. Government’s strategy has relied on rejecting higher-cost bids to contain borrowing costs while the central bank absorbs resulting liquidity through large-scale operations.

This framework has been effective in lowering yields and stabilising the market following the debt restructuring period. However, it also introduces constraints. If investors increasingly resist lower yields, maintaining this balance may become more difficult.

The question of whether domestic investors are demanding higher compensation is not yet fully resolved. However, repeated soft auctions, mixed yield movements and declining secondary market activity suggest that the conditions supporting aggressive yield compression are beginning to change.

The April 30 auction’s outcome is likely to provide clearer direction on whether this adjustment will deepen or stabilise in the near-term.

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