Yields on Government of Ghana bonds are expected to surge further as investors perceive the fiscal state of the Ghanaian economy as risky.
According to Bloomberg, investors are demanding a lofty premium to hold Ghana’s local-currency bonds as they await details of an economic programme with the International Monetary Fund.
The economy has so far witnessed worrying instability with inflation soaring to highs since 2003 and the cedi depreciating at a rapid pace to almost 39%.
Many investors have dumped cedi-denominated assets and seeking haven in the American‘greenback’.
According to Bloomberg indexes that track key markets, yields exceeded 34% and is the highest in the developing-nation asset class.
“Local bond yields remain entrenched above 31% yield for the short end and higher for rest of the curve”, Joe Delvaux, an emerging-markets distressed debt portfolio manager in London at Amundi said.
He added that “the key element remains the discussions with the International Monetary Fund, and hopefully the ensuing funded programme. At this stage, the broader market will be waiting to see what the outcome of the IMF discussions are, the programme details and what the economic assumptions that would underpin it”.
Ghana begun discussions with the International Monetary Fund for an economic programme, after authorities describe the economy as going through difficulties as a result of Covid-19 pandemic and the Russian/Ukraine war.
However, some analysts have attributed the challenges facing the economy to the rising debt level which hit ¢393.4 billion in June 2022 as well as the inadequate revenue and expenditure spillages. This has resulted in interest payments of about ¢42 billion this year alone.
Treasury yields near 30%
Already, yields on Treasury bills have neared 30% and still going up.
The rising yields come with increased costs for the government as interest expenses may likely go up.
Government will spend about ¢42 billion to service debt in 2022.