Wet investor appetite greets gov’t’s 3-yr bond

The massive investor appetite that greeted government’s three year bond last Thursday could serve as welcoming news to the economy as it goes through an election year. Maxwell Adombila Akalaare writes





THE government last Thursday realised GH¢639 million in bids through the sale of its three year bond to both foreign and local investors.

The GH¢639 million is GH¢239 million above the government’s initial target of GH¢200 million prior to the auction last week. The raised funds are earmarked for infrastructural financing in the areas of road construction.

Despite the oversubscription to the tune of GH¢639 million, the Bank of Ghana (BoG), which acts for the government on the bond market, accepted only GH¢ 219 million.The accepted bids have been settled on Monday at a yield rate of 15 per cent per bid.

Out the GH¢ 639 million bids, GH¢355 million were from foreign investors giving proof of offshore investors’ confidence in the economy even as it goes through an election year.

The oversubscription of the bond further negates earlier fears by analysts and industry watchers that investor confidence in the economy had dwindled on the back of the cedi’s weak performance against its foreign counterparts.

Prior to Thursday’s auction, a senior rates strategist at Standard Chartered Bank Research for Africa based in London was quoted by Reuters as saying that the substantial exposure that investors have had to country’s economy may cause them to have less appetite for the offer.

Another Standard Chartered official said "I don't see offshore investors participating in a very big way, especially with the concerns for the currency.”

The oversubscription of the bond and the massive offshore investor confidence that the offer attracted on last Thursday has meanwhile calmed those fears.




Mr Kwesi Amissah-Arthur, Governor, BoG

 Although anxiety over fiscal instability and government’s posture in an election is persisting, the acting Head of Treasury at BoG, Mr Adams Nyinaku told the GRAPHIC BUSINESS on phone that the oversubscription shows that “investors still have a lot of confidence in the economy.

“We set out to raise just GH¢200 million but ended up having GH¢ 639 million at a rate of 14.5 to 22 per cent. That shows you how wet the economy is to investors.

“If investors, the foreigners in particular, do not have confidence in your economy, do you think they will express interest in your country’s bonds,” Mr Nyinaku asked.

He said his outfit was expecting the offer to be over subsbcribed due to the liquidity state of and investors’ keen interest the economy at the moment.

On the cedi’s performance vis-a-vis inesvetor confidence in the economy, the acting Head of BoG’s Treasury Department said “what is driving the depreciation of the cedi is the small inter-bank market and that is very insignificant to lower the confidence of investors in the country.”

He note that the rising foreign direct inbvestments was helping to stabilise the cedi’s performance against its foreign peers.

That notwithstanding, Mr Nyinaku said the country’s wet appetite for imports will continue to have a strain on the cedi’s performance.

He added that the oversubscription of the bond also shows that local investors are competing fiercely with their foreign counterparts. “The local investors came in their numbers for the bond and I think that is also good news to the economy,” he adedd.

Going forward, Mr Nyinaku said as far as liquidity continues to stay in the country government bonds will continue to be oversubscribed.

The government last year promised to intermittentedly issue bonds in the bond market on quarterly basis in a bid to raise more funds to support government expenditure. The Thursday aution is the first in the year and its oversubscription despite the fears that led to the auction could just motivate the government to auction more in the coming quarters.