Rebounding investor confidence spurs bond market

Investor confidence in the domestic economy appears to be returning, as evidenced by a resurgence of activity in the secondary bond market.

Following a period of stagnation after the Domestic Debt Exchange Programme (DDEP), the market is showing signs of a rebound. Last week, total market turnover in the secondary bond market recovered by 18.09 percent week-on-week to GH¢1.40billion.

Trading of government bonds gained traction, with the February 2027 and February 2030 papers jointly contributing 60 percent of total market turnover. The average yield for tenors between 2027 and 2030 increased by 205 basis points to 20.05 percent, while papers maturing between 2031 and 2034 saw their yields decrease by 96 basis points to 15.72 percent.

This is attributed to the programme’s successful completion, improvements in macroeconomic metrics and optimism surrounding a deal with external creditors.

“We expect trading activity to remain lively in the bond market during the near-term as investor confidence in the Ghanaian economy steadily strengthens,” said analysts at Databank.

Activity on the market’s shorter end also remains robust, with yields on 91-day and 364-day bills rising to 29.58 percent and 33.46 percent respectively. The Treasury-bill auction held last week saw substantial investor participation, with bids exceeding the gross target by GH¢207.4million.

“We have observed a steady increase in the interbank interest rates, partly signalling a gradual tightening in liquidity on the money market as investors embrace the upcoming festive season. Also, coupled with the elevated auction target, we anticipate opportunity for a further uptick in T-bill yields this week,” Databank noted.

Apakan Securities, despite modest activity in the secondary market, forecasted a sustained rise in short-term yields as it remains the Treasury’s go-to source of funding.

“We predict a continuous rise in yields this week, aligning with government’s continued reliance on the short-term market for financing needs,” said Apakan.

Stock in trade

Despite a vibrant bond market, the equities market has shown signs of moderation. At the beginning of the second trading week in December 2023, a total of 187,785 shares were traded, corresponding to a market value of GH¢222,359. The current market capitalisation of Ghana Stock Exchange is GH¢73.8billion.

While there were no gainers or losers in the equities market, MTN Ghana recorded the highest volume of traded shares (122,944) followed by SIC Insurance Company (49,540). The benchmark GSE Composite Index (GSE-CI) closed at 3,130.60 – representing a 1-week loss of 0.59 percent but an overall year-to-date gain of 28.1 percent.

The GSE Financial Stocks Index (GSE-FSI) however maintained its value at 1,918.99 points; resulting in a 1-week loss of 1.98 percent, a 4-week loss of 6.03 percent and a year-to-date loss of 6.51 percent.

Analysts remain optimistic about the market’s prospects, predicting continued activity in the bond market and a potential rise in yields. Investors are awaiting the Consumer Price Index (CPI) release this week, which could influence trading activity. However, the festive season is expected to dampen trading volumes in the short-term.