Ghana's T-bill auction: strong demand for 91-day paper masks deeper liquidity fears

The 91-day bill was once again the most subscribed bill, as GH¢5.7 billion of the bids were tendered, representing 73% of the total bids. The uptake was, however, GH¢4.3 billion. That sounds like a win for the Treasury. It isn't.

Short-term cash, long-term problem

The dominance of the 91-day paper tells you everything. Investors are willing to lend, but only for three months. They want their money back fast. This is not a vote of confidence in Ghana's fiscal trajectory. It is a liquidity parking lot. When the shortest-maturity bill sucks up nearly three-quarters of all bids, the government is effectively financing itself with hot money. Rollover risk is acute. If sentiment shifts even slightly, the next auction could fall short. Now that the auction cleared, don't mistake relief for recovery.

The cost of short-term cash

The yield on the 91-day bill remains elevated compared to more stable periods. The government is paying a premium for short-term cash that could otherwise flow into real-economy lending. Every cedi spent on T-bill interest is a cedi not spent on roads, schools, or healthcare. The private sector gets crowded out. Banks are the largest buyers. They park excess reserves in T-bills because loan demand is weak and credit risk is high. But the more they pile into government paper, the less they lend to businesses. This is a self-reinforcing cycle: low lending → slow growth → weaker tax revenue → more government borrowing → higher yields.

The strong demand for the 91-day bill also poses a dilemma for the central bank. Accepting too many bids may drain liquidity from the banking system, while accepting too few could signal desperation. The monetary authorities must strike a balance.

Here is the blunt truth: Ghana's government just bought itself three months of breathing room. But the same question returns at the next auction. If the treasury keeps relying on 91-day paper, it locks in a refinancing treadmill that leaves no room for error. The real test is whether the government can extend the yield curve. If it cannot sell 1-year or 2-year bonds at reasonable rates, then this strong subscription is a mirage. The market is telling you it won't commit past the third quarter.

Expect the central bank to maintain tight monetary policy for the rest of the year. That means T-bill rates stay high, private credit stays squeezed, and the fiscal arithmetic gets harder with each auction. Investors holding long-dated government bonds should be nervous: the preference for short-term bills signals a market that sees default risk in the medium term.