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Cost of borrowing on bond market inches-up

The cost of government financing on the secondary bond market has been on the rise since the third quarter of 2021, with yields rising more broadly across the curve ahead of the start of the US Fed taper timeline which begins next month.

On the Ghana Fixed Income Market, yields are on the ascendency – with the two-year Treasury note rising from 15.33 percent in August 2021 to 17.5 percent in September 2021. Medium-term maturities: the three-year, five-year, as well as six-year, and seven-year, also rose from 13.29 percent, 13.48 percent, 18.51 percent, and 17.6 percent in August to 13.71 percent, 15.49 percent, and 19.4 percent respectively in September 2021.

Long-term bonds: 10-year, 15-year similarly increased to 19.02 percent and 19.63 percent in September 2021 from 18.91 percent and 18.22 percent in August respectively. However, the 20-year bond remained unchanged during the period at 19.54 percent.

From a borrowing requirement perspective, there will be a sharp tightening of financing conditions, resulting in a significant premium on the cost of government borrowing as well as other borrowers on the market.

Senior Economist with Databank – an assets management company, Courage Kingsley Martey, said yields have been under upward pressure since the late third quarter, especially beginning September 2021; largely due to the cedi-liquidity crunch as well as the US Fed Taper, which is set to be next month.