After a modest decline last week, market watchers are optimistic that the secondary bond market is poised for a comeback as investors prepare to reinvest their coupon inflows.
Recent figures showed a 3.38 percent dip in trading volumes, with market turnover falling to GH¢953 million from GH¢986 million.
This shift comes as many investors have redirected their focus toward Treasury bills amid ongoing fiscal adjustments.
Investment firm Databank noted in its weekly market update that this downturn is likely temporary. “We expect trade activity to rebound as investors position ahead of upcoming coupon inflows, supporting liquidity in the secondary market,” the firm explained. This optimism follows the substantial US$346 million coupon payment made to Eurobond holders on January 3, 2025—a payment that was part of the government’s effort to resume servicing its Eurobond debts after a major US$13 billion restructuring exercise. In that post-restructuring effort, more than US$520 million in coupon payments was disbursed, including fees for bondholders and long-awaited payments that had been frozen since 2022.
Meanwhile, investor sentiment seems to be shifting. Trades have increasingly favored mid-term bonds, with those maturing between 2027 and 2030 making up 59 percent of transactions at an average yield of 26.13 percent, compared to 41 percent of trades for bonds maturing between 2031 and 2038, which delivered yields averaging 28 percent. This trend suggests that investors are leaning towards mid-term securities, possibly reflecting a cautious approach in light of the government’s debt restructuring and fiscal consolidation measures.
On the primary market front, the demand for Treasury bills has remained strong, even as the Treasury has taken a firm stance on yield control. Last week, the Treasury rejected GH¢2.64 billion of bids from a total of GH¢10.29 billion and accepted GH¢7.65 billion—just over its target. By issuing only 91-day and 182-day bills, the government has managed to compress yields significantly; yields for these bills fell by 43 basis points and 21 basis points to 27.98 percent and 28.69 percent, respectively. This yield control strategy appears to be aimed at anchoring market expectations and lowering borrowing costs, a tactic that many believe is essential for guiding the yield curve back toward normal levels.
Some market analysts are even suggesting that if the Treasury were to re-tap longer-dated securities at a premium, it could further bolster investor confidence and stimulate demand in the bond market. With an upcoming auction on February 14, 2025, where the Treasury plans to raise GH¢8.07 billion by issuing a mix of 91-day, 182-day, and 364-day bills, all eyes will be on whether these measures will continue to drive yield compression and enhance market activity. The auction is designed to cover GH¢7.54 billion in maturing bills, resulting in a modest net issuance of GH¢530 million.
As the government maintains its tight control over borrowing costs, amid ongoing discussions with the International Monetary Fund, investors remain cautiously optimistic. The current environment suggests that the secondary bond market could soon see a revival, spurred by disciplined fiscal policy and strategic market interventions—a welcome sign for those looking to navigate these challenging times.
