Trading in Ghana’s Domestic Debt Exchange Programme (DDEP) bonds increased by GHS 1.21 billion in the week ending October 2. This surge occurred as investors moved GHS 1.19 billion out of short-term Treasury bills. The reallocation shows a clear shift in investor strategy within the fixed-income market.
This significant movement happened despite a modest 1.72 per cent decline in total market turnover, which reached GHS 6.82 billion. The near-perfect offset between the rise in DDEP bond trading and the fall in Treasury bill activity indicates investors are repositioning along the maturity curve. They are not simply withdrawing from government securities but are seeking different types of debt instruments.
This development fits into Ghana's broader economic narrative following its debt restructuring efforts. The government’s Domestic Debt Exchange Programme aimed to make public debt sustainable. Increased investor confidence in DDEP bonds could signal a positive step towards market stability and recovery. It suggests a growing acceptance of the restructured debt instruments among local investors.
The Ghana Fixed Income Market’s weekly trading report confirmed these figures. It showed DDEP bond turnover climbed 77.67 per cent to GHS 2.76 billion from GHS 1.55 billion the previous week. Conversely, Treasury bill trading dropped 24.61 per cent to GHS 3.64 billion from GHS 4.83 billion. This data highlights a pronounced change in the market's composition.
Looking ahead, this shift could influence future government borrowing costs and market liquidity. If this trend continues, it might encourage the government to issue more longer-term bonds. Decision-makers will closely monitor whether this renewed interest in DDEP bonds translates into broader market confidence. It could also affect the Bank of Ghana's monetary policy decisions.
Treasury bills still represent the largest market segment, accounting for GHS 3.64 billion, or 53.3 per cent of total turnover. However, DDEP bonds now make up 40.5 per cent of all activity, up from 22.4 per cent. Together, these two categories dominate Ghana's fixed-income market, representing almost 94 per cent of total turnover. This reinforces the government's significant presence in the debt market.
The movement may signal the early stages of a duration trade, where investors seek longer-term returns. With the Bank of Ghana maintaining its monetary policy rate at 14 per cent, investors might expect inflation and interest rates to remain stable. This expectation could lead them to move beyond short-term bills in search of better capital gains and more attractive longer-term yields. This strategy aims to lock in higher returns over an extended period.
Yield movements were uneven, suggesting a complex market dynamic. For example, the February 2028 and February 2029 DDEP bond yields each increased by 32 basis points. The February 2030 bond yield rose even more sharply, gaining 42 basis points to 14.23 per cent. Rising yields imply falling bond prices, indicating some selling pressure or a demand for higher compensation for maturity risk on these specific bonds.
In contrast, longer-dated bonds saw yield declines. The February 2035 bond yield dropped by 44 basis points to 14.36 per cent. The February 2037 yield fell 58 basis points to 14.92 per cent. The February 2038 security also recorded a 23-basis-point decline to 14.93 per cent. This fragmented market suggests investors are selectively acquiring certain longer-dated securities while repricing some medium-term bonds more cautiously.
Trading was also highly concentrated on specific bonds. The February 2029 DDEP bond alone recorded turnover of about GHS 1.48 billion. This single security represented approximately 53.4 per cent of all DDEP bond turnover. It also accounted for more than one-fifth of activity across the entire fixed-income market. This concentration complicates the overall interpretation of the week's numbers.
The increase in DDEP trading could reflect a broad revival in appetite for restructured government debt. However, it might also be heavily influenced by a few large institutional transactions. In markets with uneven liquidity, one or two large trades can significantly alter weekly turnover and quoted yields. Such events do not always indicate a lasting change in overall investor sentiment. This makes it important to monitor future trading patterns.
A more revealing measure, excluding sell-and-buy-back transactions, showed cash market turnover remained effectively unchanged at GHS 6.41 billion. The reported 1.72 per cent decline in overall turnover was mainly due to weaker activity in sell-and-buy-back transactions, which fell 22.3 per cent to GHS 411.88 million. This suggests the market's internal allocation changed significantly, rather than its overall size shrinking.
The contrast with newly issued government bonds was particularly striking. Turnover in new government bonds plunged 78.63 per cent to just GHS 1.17 million. Trading in the September 2030 bond amounted to GHS 1.12 million, while the March 2033 bond recorded minimal activity. This further underscores the shift in investor focus towards the DDEP instruments.