Govt to pay extra interest rate for 5-year, 2-year bonds

Government will pay an interest rate of 22.30 per cent and 21.50 per cent for the 5-year and 2-year bonds issued on Friday, May 6, 2022.

The sale of the debt instruments were extended to Friday, May 6, 2022 to accommodate for the Labour Day and the Eid holidays last week.

The interest rate, which will probably increase the country’s interest payment will be paid semi-annually, until maturity in 2027 and 2024 respectively.

Until recently, government was paying between 19 per cent and 20.50 per cent for medium term financial instruments.

However, the sale of the debt instruments recorded mixed subscriptions, signalling further perceived risks in the economy.

According to the trading results published by the Bank of Ghana, government mobilisedGH¢601.9 million from the 2-year bond at an interest cost of 21.50 per cent, while GH¢575.4 million was secured from the 5-year bond at an interest rate of 22.30 per cent.

This means that about ¢1.4 billion of the maturing amount were redeemed by the investors who held the maturing 2-year bond.

For the 5-year bond, there wasn’t any target set since it was a new issuance.

However, with regard to the 2-year bond, government was seeking to rollover GH¢2 billion.

Analysts say though the interest rate for the debt instruments were high, they were within the pricing guidance.

They however attributed the shortfall in the sale of the bond to extremely tight liquidity on the market, since the Bank of Ghana’s monetary measures kicked-in on April 1, 2022.

In addition to the tight liquidity, there are also investors who remain concerned about the inflation uncertainty and the implications of the rising inflation on their real returns. These investors tend to hold on for higher nominal yields to be able to compensate for the inflation risks.

Absa, Black Star, CalBank, Databank, Ecobank, Fidelity, GCB, IC Securities and Stanbic were the book runners.

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