The secondary bond market is expected to see a rebound in activity as investors prepare to reinvest coupon inflows, following a decline in trading volumes last week.
Market turnover fell 3.38 percent to GH¢953million, down from GH¢986million, as investors shifted focus toward Treasury bills.
“We expect trade activity to rebound as investors position ahead of upcoming coupon inflows, supporting liquidity in the secondary market,” investment firm Databank noted in its weekly market update.
The decline in trading volumes comes six weeks after the latest US$346million coupon payment to Eurobond holders on January 3, 2025. This follows government’s decision to resume servicing its Eurobond debts in October 2024, after successfully completing a US$13billion restructuring exercise.
In the first post-restructuring payment, over US$520million in coupon payments were disbursed to investors. This included US$120million in consent fees to bondholders who participated in the debt exchange programme and US$320million in frozen coupon payments that had been suspended since 2022.
The next coupon payment is due in July 2025.
Shifting sands
Amid the decline in secondary market activity, investor preferences remained tilted toward mid-term bonds – with maturities between 2027 and 2030 accounting for 59 percent of trades at an average yield of 26.13 percent.
Longer-dated bonds, maturing between 2031 and 2038, made up 41 percent of total trades at an average yield of 28 percent.
Databank attributed this trend to shifting investor sentiment. “Bonds maturing between 2027 and 2030 dominated trading with a 59 percent share, nudging average yields to 26.13 percent while 2031–2038 maturities accounted for 41 percent of total trades at an average yield of 28 percent,” the firm noted.
The shift toward Treasury bills, Databank noted, suggests that investors are seeking shorter-term, lower-risk instruments; particularly amid government’s ongoing debt restructuring and fiscal consolidation efforts.
Primary market
While investor demand for Treasury bills remained strong, the Treasury maintained its firm stance on yield control, rejecting GH¢2.64billion of the GH¢10.29billion in bids received last week. Government accepted GH¢7.65billion, slightly exceeding its target of GH¢7.26billion but below the GH¢9.06billion in maturities.
The Treasury issued only 91-day and 182-day bills, leading to further compression in yields. “Only the 91- and 182-day bills were issued, with yields declining by 43 basis points and 21 basis points to 27.98 percent and 28.69 percent respectively,” Databank reported.
The investment firm noted that government’s yield control strategy is aimed at anchoring market expectations and reducing borrowing costs. “We believe the Treasury’s yield control strategy seeks to anchor market expectations, curb aggressive rate demands and ultimately reduce borrowing costs, thereby guiding the yield curve toward normalisation,” Databank stated.
Market analysts suggest that if government considers re-tapping longer-dated securities at a premium, it could further boost investor confidence and enhance demand in the bond market.
“In our view, if the Treasury considers re-tapping longer-dated securities at a premium in the near-future, this move could enhance demand,” Databank added.
Upcoming issuance
The Treasury will seek to raise GH¢8.07billion in its upcoming auction on February 14, 2025, through the issuance of 91-day, 182-day, and 364-day bills. The amount is intended to cover GH¢7.54billion in maturing bills, resulting in a net issuance of GH¢530million.
Market participants will be watching closely to see whether the trend of yield compression continues as government maintains its tight control over borrowing costs amid engagements with the International Monetary Fund.
Source: thebftonline.com
