Investor confidence soars

.... as 3yr bonds heavily oversubscribed

Elorm Desewu

Government’s three year fixed rate bonds issued last week have been heavily oversubscribed by 150 percent by both local and offshore investors.

This demonstrates how domestic and foreign investors have greater confidence in the Ghanaian economy.

Although it was heavily oversubscribed, the Bank of Ghana who acted on behalf of government accepted 1.4 billion cedis ($747 million) in bids for its three-year bonds, with an average yield of 21 percent which far exceeds what they were looking for.

Ghana had initially planned to sell 500 million cedis worth of the bonds at the auction, but decided to accept more bids as it was oversubscribed by 150 percent.

This is to enable the government to restructure its domestic debt in the country.

Ghana’s domestic debt as at July stood at GHC 13.7 billion, up slightly from GHC 11.8 billion in December last year.

The securities will be listed on the Ghana Stock Exchange (GSE) for secondary market trading both on the floor of the Exchange or over the counter (OTC). Trading in the securities is subject to the listing rules of the GSE for Government Securities.

The Bond will be redeemed by the issuer on the maturity date, which is on 26th October, 2015. Such redemption will be at par.

The rates on 534 million cedis of bonds Ghana sold on May 23 this year have dropped to 19 percent from 24 percent at the auction, according to prices from Standard Chartered Plc’s Ghana unit. In February, 219.7 million cedis of the notes were sold at a yield of 14.99 percent. The cedi has weakened 12.6 percent this year to 1.8750 per dollar.

The cedi is expected to weaken to 1.90 per dollar by the end of the year on dollar demand by traders to meet year-end sales.