Government of Ghana reacts to reports that it could not sell 20-year bonds yielding above 20% to investors

The government of Ghana has reacted to reports that it was able to sell only $30 million (GH¢162.1 million) out of the $83 million (GH¢450 million) target of 20-year bonds to investors.

Finance Minister, Ken Ofori-Atta
  • The Ghanaian government reacts to a Bloomberg report that it couldn’t sell 20-year bonds yielding above 20% to investors.
  • The Ministry of Finance revealed that the nature of the issue did not require that the full amount of GH¢450 million be raised once.
  • The move was rather to help deepen the domestic market and improve liquidity through the issuance of benchmark size bonds.

The government said although the amount received in bids was less than the targeted amount, the nature of the issue did not require that the full amount of GH¢450 million be raised once.

The revelation was made in a press statement issued by the Public Affairs Department of the Ministry of Finance on Wednesday, August 28, 2019.

As a result, it said “contrary to the articles published, this was not a failed or under-subscribed offering but a fairly priced offering that has established another data point along our yield curve.”

The statement further noted that prior to the issuance, “we were aware that given the current market conditions and the limited appetite for longer-dated bonds, the size of the debut issue was unlikely to be of a benchmark size, and that was the reason it was structured as a shelf offering so additional issuances could be done over time to reach the targeted GH¢450 million benchmark level.”

The ministry said the government set out primarily to elongate the country’s debt tenor and yield curve by issuing a 20-year bond for the first time in the country’s history.

This, according to the ministry was to help deepen the domestic market and improve liquidity through the issuance of benchmark size bonds that will be sizeable enough for investors to trade in and out.

Adding that the trade in and out would then create liquidity, better price discovery or pricing and deepen the secondary market.

Background

A Bloomberg report recently noted that Ghana was able to sell only $30 million (GH¢162.1 million) out of the $83 million (GH¢450 million) target of 20-year bonds to investors.

According to the report, investors refused to take the offer due to the country’s currency risk.

It said, “The duration is too long for the level of investor confidence in the economy, Anthony Asare, the Accra-based head of treasury at GCB Bank Ltd., the nation’s biggest lender and a primary dealer in government debt. “People are not very certain over that length of time.”

Adding that “The yield pickup is not sufficient to compensate for the risk, Mark Bohlund, an Africa economist at Bloomberg Economics, said in an emailed response to Bloomberg questions. If you’re a foreign investor then you not only care about the yield on the bond but also at what exchange rate you can repatriate your money.”

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