A pronounced divergence has emerged in Ghana’s money market during the first four months of 2026, with yields on 91-day Treasury bills falling far more sharply than those on 364-day instruments, and to a lesser extent 182 day bills as well. The result is a rapidly steepening yield curve—one that is beginning to reshape investment strategies, bank pricing behaviour and expectations for medium-term debt issuance.
Recent auction data from the Bank of Ghana shows that as of mid-April 2026, the 91-day bill was yielding about 4.9 percent, while the 364-day bill was offering roughly 10.1 percent. This implies a spread of more than 500 basis points—more than two and a half times that at the start of the year when the spread between the two was a mere 182 basis points, with 91 day bills yielding 11.11 percent and 364 day bills yielding 12.93 percent.
The scale of the decline in short-term yields is striking. As recently as February 2026, the 91-day bill was still trading around 8–9 percent, compared with about 11 percent for the 364-day tenor. Within just two months since then, the 91-day yield has nearly halved, while the 364-day yield has declined far more modestly.
Market analysts attribute this to a confluence of liquidity conditions and policy signals.
“The short end is being driven primarily by excess liquidity and expectations of possible further easing,” asserts a fixed income trader at a leading Accra-based brokerage. “Banks are flush with cash, and they prefer the flexibility of shorter maturities—even at lower yields.”
This liquidity surge reflects several factors.
One is the monetary easing signals. The monetary policy rate has been trending downward, with the central bank anchoring expectations of lower short-term rates.
The second is the improved inflation outlook. Inflation has eased significantly, reducing the risk premium demanded on short-term instruments.
A third is the central bank’s liquidity injections. Open market operations and maturing government securities have ensured liquidity.
As a result, investors are willing to accept sharply lower yields on short-dated instruments in exchange for liquidity and reduced tenor risk.
Why longer tenors are more “sticky”
In contrast, yields on 364-day bills have not fallen as quickly. Analysts say this reflects both structural and risk-related considerations.
“Longer-dated bills embed expectations about fiscal risks, refinancing pressures and macro-economic uncertainty,” explains an analyst at an asset management firm in Accra. “Those risks haven’t disappeared, so yields remain elevated.”
Indeed, while short-term rates are anchored by immediate liquidity conditions, longer tenors reflect fiscal sustainability concerns as investors remain cautious about Ghana’s public debt trajectory and refinancing needs, the demand for premiums as compensation for locking funds away for longer periods as well as uncertainty over future inflation and exchange rates.
The persistence of these risk premiums explains why the 364-day bill continues to trade in double digits even as shorter maturities collapse.
A steepening yield curve takes shape
The widening gap between short- and long-term yields has resulted in a classic steep yield curve—often interpreted as a signal of expected sustained economic stabilization over the short term combined with lingering medium-term uncertainty.
“The curve is steepening because the market expects lower rates in the near term but is still cautious about the medium-term outlook,” says a treasury manager at a commercial bank. “It’s not a recession signal—it’s more about normalization from very high rates.”
Historically, Ghana’s yield curve has often been inverted or flat during periods of tight liquidity and high inflation. The current steepening therefore marks a shift in market sentiment.
These dynamics are increasingly being reflected in the pricing behaviour of commercial banks, though not always symmetrically.
Data from the central bank shows that while treasury bill rates have declined sharply, commercial bank deposit rates remain relatively sticky, often lagging behind movements in government securities.
In practice short-term deposit rates (30–90 days) have begun to decline in line with falling 91-day bill yields but longer-tenor fixed deposits (6–12 months) continue to offer comparatively higher rates, mirroring the elevated yields on 364-day bills.
“Banks are adjusting, but cautiously,” notes a senior banker in Accra. “We don’t want to re-price deposits too aggressively downward because of the competition for funds.”
At the same time, lending rates are adjusting more slowly, reflecting structural rigidities and risk pricing considerations.
This partial transmission highlights a key feature of Ghana’s financial system: while treasury bill yields provide a benchmark, bank pricing is influenced by additional factors such as high credit risk and operating costs as well as stringent regulatory requirements.
The steepening yield curve is also influencing investor asset allocation decisions.
Short-term investors—particularly corporates and money market funds—are increasingly favouring 91-day bills for liquidity management, despite lower returns.
Conversely, longer-term investors such as pension funds and asset managers are extending investment tenors to lock in higher yields at the long end of the market.
“There’s a clear barbell strategy emerging,” claims one investment strategist. “Investors are either going very short for liquidity or moving longer to capture yield. The middle is less attractive.”
Last week’s treasury bill auction results bear this out. The 91 day bill attracted bids worth GH¢2.56 billion, the 364 bill attracted total bids of GH¢1.16 billion, but the 182 day bill, (which is in the middle in terms of tenor) only attracted GH¢771 million worth of bids.
Implications for bond issuance in 2026
Perhaps the most important consequence of these dynamics lies in their implications for medium-term bond issuance by both government and corporates.
A steep yield curve typically translates into higher borrowing costs for longer tenors, and Ghana is no exception.
For government, medium-term bonds (of two years tenor and longer) are likely to be priced at a significant premium over the 364-day bill, reflecting the steep curve. The most recently issued seven year bonds, which marked government’s return to the medium term bond market after a three year hiatus were regarded as stingily priced at 12.5 percent. Yet the issuance still attracted GH¢3.1 billion in bids from investors.
But with the widening spread between short and medium term securities yields, government may face a trade-off between locking in funding at higher rates or still relying inordinately heavily on short-term borrowing.
Corporate bond issuances will need to pay even more, offering attractive risk premiums over government benchmarks to attract investors and so issuers may delay offerings in anticipation of further easing of yields at the long end of the market.
“The steep curve raises the cost of longer term funding,” says a capital markets advisor. “Unless long-end yields come down, corporates will find it expensive to issue medium-term debt.”
But corporate financial chieftains still reckon that although the Ghana Reference Rate now stands at just 10.06 percent, actual average lending rates are still approaching 20 percent which is higher than what investors may now accept for a medium term corporate bond issuance.
However, the potential upside is that if the steep curve reflects expectations of continued macroeconomic improvement, it could eventually lead to a flattening of the yield curve—where long-term yields fall as confidence strengthens.
Risks and outlook
Looking ahead, the key question is whether the current steepening trend will persist. Several scenarios are possible.
One is a continued steepening whereby if liquidity remains high and fiscal risks persist, the gap between short- and long-term yields could widen further.
Alternatively, if inflation continues to fall and fiscal conditions improve, long-term yields may decline, flattening the curve.
But there is a third possibility, of a resurgence of inflation or currency pressures that could push up short-term rates again.
For now, the consensus among market participants is that the steep curve reflects a transitional phase.
“We are moving from a high-inflation, high-rate environment to a more stable one,” says the asset manager. “The yield curve is adjusting to that reality.”
The sharp decline in 91-day Treasury bill yields relative to 364-day instruments marks a significant shift in Ghana’s interest rate landscape. Driven by liquidity conditions, policy signals and evolving risk perceptions, the resulting steep yield curve is reshaping investment strategies, influencing bank pricing and setting the tone for debt issuance in 2026.
For policymakers, the challenge will be to sustain macroeconomic stability while managing borrowing costs. For investors and issuers alike, the message is that the shape of the yield curve now matters as much as the level of interest rates—and it will be a critical determinant of financial decisions in the months ahead.
By: Toma Imirhe / businesspostonline
