91-day T-Bill yields fall below inflation

Investors in Ghana’s most popular government security are now earning less than the rate of inflation. With the Bank of Ghana (BoG) expecting inflation to keep rising, those losses could deepen in the months ahead.

The interest rate on the 91-day Treasury bill fell to 4.68 percent at lastweek’s auction, held on September 25, according to the BoG. That is below the headline inflation rate of 5.0 percent recorded in August, leaving investors with a negative real return, the yield after adjusting for inflation, of about 0.3 percentage points. A year ago, the 91-day bill paid more than 10 percent.

The squeeze is set to tighten. Governor of the BoG, Dr Johnson PanditAsiama, said the central bank expects inflation to rise into its medium-term target band of 8 ± 2 percent over the next few quarters.

“Presently, headline inflation remains below the lower bound of the medium-term target band and is projected to move up into the band over the next few quarters,” Dr Asiama said at the press briefing that followed the 132nd MPC press briefing.

Yields fell across all three Treasury bills at last week’s auction. The 91-day rate eased from 4.69 percent the previous week. The 182-day bill fell to 6.37 percent from 6.48 percent, and the 364-day bill dropped to 9.83 percent from 9.98 percent.

Investors continue to buy despite the falling returns. At last week’s auction, bids totaled GH¢3.66 billion against a government target of GH¢2.75 billion, an oversubscription of about 33 percent. Government accepted GH¢2.90 billion. The 91-day bill again drew the bulk of the demand, with GH¢2.08 billion tendered, of which GH¢1.88 billion was accepted.

Demand has been uneven. At the previous week’s auction, on September 18, investors tendered GH¢3.96 billion against a larger target of about GH¢4.12 billion, leaving it undersubscribed, and government sold GH¢2.21 billion. Analysts attributed part of that shortfall to banks favoring BoG bills, which offer more competitive returns. Government has set a lower target of GH¢2.24 billion for thisweek’s auction.

Savers holding ordinary bank accounts are also losing out. The average interest rate on savings deposits stood at 4.10 percent in August, below the 5.0 percent inflation rate. That means money kept in a typical savings account is losing about 0.9 percent of its value a year.

Demand deposits paid an average of just 1.62 percent. Time deposits still offer positive real returns, with the average three-month rate at 8.68 percent and the six-month rate at 9.72 percent, although both have fallen from 10.50 percent in June.

The compression at the short end of the market has been rapid. The 91-day bill rate averaged more than 11 percent in January 2026 and fell below 5 percent by March. Over the same period, inflation climbed from a low of 3.2 percent in March to 5.0 percent in August, closing the gap between what investors earn and what they lose to rising prices.

The pressure falls hardest on investors who favor short-dated instruments, including many individuals, corporate treasuries and money market funds. Longer-dated securities still offer a cushion. The 364-day bill’s 9.83 percent yields almost 5 percentage points above inflation. Yields on post-restructuring government bonds on the secondary market ranged from about 10.9 percent to 15.7 percent in August.

The gap between short and long rates is likely to push investors further along the yield curve in search of real returns. It also leaves the 91-day bill trading far below the BoG’s policy rate of 14.0 percent, and below the interbank rate of 10.20 percent.

The central bank said the recent rise in inflation has been driven mainly by utility costs and fuel prices. Non-food inflation rose to 6.8 percent in August from 6.1 percent in July, on the back of pass-through effects from upward adjustments in utility tariffs and elevated crude oil prices. Food inflation eased marginally to 3.0 percent from 3.1 percent.

The August figures also contain an important detail. Consumer prices actually fell by 1.0 percent between July and August, as food prices dropped by 2.6 percent in the month. The rise in the annual rate therefore partly reflects the sharper monthly fall in prices a year earlier, in August 2025, rather than a fresh surge in prices alone.

Dr Asiama stressed that underlying pressures remain contained. The BoG’s core inflation measure, which excludes energy and utility prices, eased to 4.2 percent in August from 4.3 percent in July. Survey-based inflation expectations among consumers, businesses and the banking sector also declined.

“Despite this, all the inflation expectations and core inflation measures eased, indicating a moderation in underlying inflation,” he said.

The MPC nonetheless identified several risks that could push inflation higher. According to the Governor, these include further upward revisions to utility tariffs, rising ex-pump petroleum prices and their linkage to transport fares, a stronger US dollar following the US interest rate hike, and possible spillovers from global supply chain constraints. On the other side, he said continued fiscal consolidation, improved food supply and exchange rate stability could help contain prices.

For investors and government alike, the direction of Treasury bill yields will be decisive. If inflation rises as projected while short-term yields keep falling, real losses on government paper will widen. At some point, investors may demand higher returns to keep lending to government, raising its borrowing costs just as it has begun to benefit from cheaper domestic financing.