Ghana 3-Year Bond Yield Seen Falling on Plan to Cut Spending

Yields on Ghana’s three-year debt may decline at an auction today as the government’s borrowing needs ease amid plans to narrow a budget deficit that widened the most in four years in 2012.

The yield on this year’s second sale of 400 million cedis ($209 million) is expected to be 15 percent to 15.3 percent, Angus Downie, head of economic research at Ecobank Transnational Inc.’s London office, said in e-mailed comments on March 4. The rate was 16.7 percent at the previous auction on Jan. 10, with yields on the notes dropping to 15.3 percent by the March 5 close, according to data from the local unit of Johannesburg-based Standard Bank Group Ltd. Ghanaian markets were closed yesterday for a public holiday.

The West African nation plans to reduce the budget deficit to 9 percent of gross domestic product this year, Finance Minister Seth Terkper said on March 5. The deficit jumped to 12.1 percent of GDP last year against a target of 6.7 percent because of higher spending on wages, fuel subsidies and lower revenue from corporate taxes.

“The need for the government to seek finance from local or foreign sources in 2013 is likely to be less strong,” said Downie. “A smaller deficit means there is less pressure to raise finance, which means the government can offer lower yields.”

The cedi, Africa’s third-worst performer against the dollar in 2012, has weakened 0.4 percent this year. It gained 0.1 percent to 1.9125 per dollar by 9:35 a.m. in Accra, according to data compiled by Bloomberg.

“We expect the offer to be oversubscribed,” Kofi Pianim, a bond trader at Standard Bank Group’s Stanbic Bank Ghana Ltd., said by phone on March 4. The notes will probably be priced to yield 15 percent to 16 percent at today’s sale.

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