The Bank of Ghana has returned more than GH˘400 million in surplus of its oversubscribed three-year bond issued on Thursday, February 23.
This is because the government’s three-year bond which was to raise GH˘200 million to fund maturing debts and finance government’s expenditure was hugely oversubscribed. The bank received 639 million cedis in bids.
Adams Nyinaku, Head of the bank's treasury said 169million cedis worth of accepted bids were from offshore investors. The bond was oversubscribed to the GH˘639 million for which the government accepted GH˘219 million at a yield of 14.99 per cent.
The bond sale, Ghana's first auction of 2012 open to offshore investors, had been seen as a test of foreign appetite in Ghana during an election year. The move had surprised market watchers who had expected concerns about the currency and pre-election spending to reduce demand.
Traders, who have been eyeing the sale as a successful auction, would further support the cedi, which was trading at 1.7050 in early trade against the dollar.
Foreign investors took half while the remaining went to local investors. The bond will have a yield of nearly 15 per cent to investors- one of the highest returns in recent times.
This is the first of the four government papers expected to be issued every quarter this year. In 2011, Ghana’s auction of 400 million cedis ($265 million) of three-year bonds was oversubscribed by 88 per cent as investors show confidence in the economy.
Investors bid a total of 753.7 million cedis for the offer, which closed, according to the former head of treasury Mr Francis Andoh, The bank sold GH˘ 401.2 million of the notes at a 13.45 per cent yield, he said.
“It shows investors are still confident about our economy despite some challenges,” Mr Andoh said.
“Foreign-based investors were predominant,” and their purchases should strengthen the cedi, he said. Ghana's relatively strong record on governance and some signs of the emergence of middle-class consumers make it an attractive investment destination for some.
The euro zone debt crisis has made many investors much more risk-averse and led them to retreat from the African assets to which they flocked less than two years ago.
The Ghanaian cedi has fallen about 10 per cent against the dollar on the year for cedi-dollar to trade around new lows of 1.68-1.70 in early January.
Like other African countries, Ghana has had to offer more attractive yields on its debt to find buyers -- the last auction of five-year bonds on Dec. 8 produced an average yield of 15.9 per cent compared with 14.25 per cent for a first tranche of the same bonds auctioned in August.
Even then, the auction was only slightly oversubscribed and failed to attract offshore funds.
Source: Daily Graphic
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