Treasury bill faces third consecutive undersubscription

Treasury Bills popularly known as T-Bills has for three weeks now experience major undersubscription prompting many investors to reassess their strategies.

While T-bills have long been regarded as one of the safest and most accessible investment options in Ghana, the recent downturn in returns is raising key questions: Is it still safe to buy T-bills in Ghana? And is it still worth it?

This GhanaWeb Business article highlights the current state of Ghana's treasury market, the risks and opportunities it presents, and what investors should consider moving forward.

Why are T-bills falling?

According to data and reports from the Bank of Ghana, treasury yields have declined steadily in recent weeks, with the average 91-day and 182-day bill rates falling to around 24% and 26% as of mid-May 2025.
This marks a significant drop from earlier this year when yields hovered closer to 30%.

The main drivers of the decline include

High Investor Demand: Investors are rushing to T-bills for safety and relatively high returns pushing prices up and yields down. When demand is high, the government can offer lower interest rates.

Government Financing Strategy: The government is under less pressure to borrow at high costs due to improved cash flow from domestic revenue and support from the IMF program. This gives it room to lower interest costs.

What are the risks associated?

While treasury bills are among the safest investments available in Ghana, they are not entirely risk-free.

Investors especially those looking to preserve and grow their capital should be aware of the following key risks and considerations;

1. Decline in Yields: One of the most immediate concerns for investors is the steady decline in interest rates. As yields fall, the income potential from T-bills diminishes, particularly for short-term investors who frequently reinvest their matured bills.

2. Currency Depreciation (for Foreign Investors): For non-resident investors or Ghanaians holding wealth in foreign currency, exchange rate fluctuations are a critical factor. If the Ghana cedi depreciates significantly during the investment period, returns may be wiped out when converted back to dollars, euros, or pounds.

While the cedi has shown signs of stabilization in Q1 and Q2 of 2025, it remains vulnerable to external shocks, import pressures, and global interest rate changes making forex risk an important consideration for offshore investors.

What should investors do?

As treasury bill yields continue to trend downwards, investors are advised to protect returns and manage risk amid evolving market conditions.

With that, investors can lock in higher yields if they believe rates will continue to fall.

Also investors must ladder their investment by spreading across different maturities to manage reinvestment risk.

There is a need to diversify yields with low-risk instruments like fixed deposits or money market funds for more flexibility.

Conclusion

Despite falling yields treasury bills remain a safe and stable investment option in Ghana, especially for risk-averse investors looking to preserve capital and earn predictable returns.

Treasury bills continue to offer competitive yields with minimal risk as the 30 percent returns maybe lagging behind.

SP/MA

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