Ghana to Offer First 7-Year Bonds With Two Second-Half Sales

Ghana will sell 200 million cedis ($98 million) in two issues of seven-year bonds, the first time the West African nation is offering debt of the duration as it seeks to extend the yield curve on government debt.

Ghana will sell 100 million cedis next month and 100 million cedis in November, the Accra-based central bank said in a statement on its website today. No dates for the sales, which will be open to foreign and domestic investors, were given.

The world’s second-biggest cocoa producer, is offering longer-dated bonds amid attempts to boost debt trading and give investors more ways to buy into the second-biggest economy in West Africa, where growth is expected to reach 8 percent this year, according to the Finance Ministry.

Three-year and five-year bonds, which are traded over-the-counter by banks, are also listed on the Ghana Stock Exchange for secondary trading. Ghana will sell 600 million cedis five-year bonds in September, according to the Bank of Ghana, following on three sales of three-year debt in the first half of the year.

The country also plans to offer $1 billion in its second Eurobond sale this month, according to the Finance Ministry.

The offer of seven-year debt next next month may yield 20 percent, Kofi Pianin, a bond trader at the Ghanaian unit of Standard Bank Group Ltd., said by phone today.

“It comes at a time when the economy is still looking for some fiscal consolidation and more stability in the currency,” he said. “It’s however welcome news for pension funds that are looking for ways to build their assets.”

Cedi Weakens

Ghana’s budget deficit in the first four months of 2013 was 3.8 percent of gross domestic product, compared with a target of 3 percent, the central bank said on May 22. The cedi, which depreciated 6.9 percent against the dollar this year, weakened 0.9 percent to 2.045 per dollar by 2:16 p.m. in Accra.

Longer-term notes will help the central bank align yields on shorter-dated debt with its key lending rate, Collins Appiah, executive director of asset management at Accra-based NDK Financial Services Ltd., said by phone. Borrowing costs on Ghana’s 91-day Treasury bills are the second-highest in Africa after Malawi at 23.1 percent, according to data compiled by Bloomberg.

“With time the Bank of Ghana will be able to sell more bonds in the long end of the market, thereby taking the pressure off the short end to make way for short-term interest rates to decline steadily,” Appiah said.

The central bank increased its key lending rate by 100 basis points, or one percentage point, for the first time in almost a year to 16 percent on May 22. Ghana’s three-year bonds are currently trading at a yield of 20.25 percent and five-year notes at 20.15 percent, said Pianim.

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