Government to pay 20.75% interest rate for 5-year bond

Government will pay more for the 5-year bond issued yesterday, as the interest cost for the debt instrument was 20.75%.

This was higher than the 19.75% paid for the 2-year bond issued in February 2022.

The Initial Pricing Guidance was between 20% and 20.75%.

According to the auctioning results, government mobilized 862 million from the sale of the 5-year Treasury bond, lower than the 1.0 billion target.

This indicates that the government continue to struggle to mobilize funds from the debt market.

Analysts say the price of the debt instrument was in line with secondary market conditions, as investors demanded higher premium for the new issuance.

This is due to the rising inflation, the depreciation of the cedi and uncertainty about the Bank of Ghana’s policy rate which is creating a higher level of uncertainty about the direction of yields of Government of Ghana bonds.

Analysts, however, believe the amount raised was broadly expected given the absence of non-resident investors in the acquisition of the bond.

Presently, domestic interest payments accounts for about 78% of total interest rate payments.

With the prevailing upside risks to domestic interest rates, aggressive control of government spending is very important since the era of cheap money is over.

Absa, Black Star, CalBank, Databank, Ecobank, Fidelity, GCB, IC Securities and Stanbic Bank were the sponsoring firms or bond market specialists.