Investors’ demand for Treasury bills (T-bills) fell by 43 percent, marking the market’s first under-subscription in 17 consecutive weeks.

This marks a shift from the strong investor demand that had characterised the market throughout 2024, particularly by banks seeking safety at the shorter end of the market, following the domestic debt exchange programme (DDEP) and elevated lending risks due to the prevailing macroeconomic situation.

Analysts believe a recent Bank of Ghana (BoG) policy adjustment – the three-layered Cash Reserve Requirement (CRR) for banks – as the main culprit.

Analysis of the directive shows that approximately GH¢16.2billion (US$1.2billion) could flow from banks to the BoG on the back of the new requirement policy effective Monday, April 1, resulting in a tightening of cedi liquidity and a potential appreciation of the cedi in the short term.

Banks, faced with the need to bolster their reserves to comply with the new CRR levels, appear to be prioritising shoring up their liquidity over investing in Treasury bills.

Analysts at Apakan Securities believe the three-level CRR adjustment by the central bank last week triggered the pullback in demand conditions as banks mull over the policy action.

Despite the under-subscription, there was a silver lining for the government as the cost of borrowing dipped marginally.

While the treasury bill auction under-subscription indicates a potential challenge in the short term, the continued decline in yields suggests a cautious optimism in the market.

However, analysts predict a slower pace of yield decline in the coming months due to the CRR adjustment and a potential slowdown in the disinflation process. The next auction on Friday, April 5 will be closely watched to gauge investor sentiment and assess the full impact of the apex bank’s tightening measures on the nation’s short-term financing efforts.

On the secondary market, analysts also perceive a net-offered position on the market this week as the CRR amendment takes effect.

Despite the decline in demand, the treasury accepted all bids placed, raising GH¢2.35billion. This fell short of the intended target of GH¢4.16billion, with the shortfall impacting the maturity coverage ratio, which dipped to 0.60x – a level last seen in April 2022.