Ghana’s Five-Year Borrowing Costs Decline at Year’s First Sale

Ghana’s five-year borrowing costs declined at the first auction of the duration in 2013 after demand for the debt exceeded the amount for sale by 52 percent.

The Bank of Ghana sold 649.96 million cedis ($298 million) of the notes at 19.04 percent, it said in an e-mailed statement from Accra, the capital. That compares with 23 percent on five-year debt sold in August 2012.

Ghanaian yields rose this year and the local currency weakened against the dollar as an opposition party challenged President John Dramani Mahama’s election victory in December. The budget deficit in the first seven months of 2013 was 6.3 percent of gross domestic product, compared with a target of 5.6 percent, the central bank said on Sept. 18. Ghana’s Supreme Court upheld Mahama’s win on Aug. 29.

“Investor confidence is soaring after the court verdict.” Elvis Darku, head of fixed-income trading at the Ghanaian unit of Lagos-based Access Bank Plc, said before the auction. “We see rates coming down on shorter-term instruments and a strong outlook for the longer-dated ones.”

The Bank of Ghana, which offered 600 million cedis of the five-year notes today, received 910.96 million cedis of bids. Rates ranged from 16 percent to 23 percent.

Yields on debt due August 2017 retreated 50 basis points, or 0.5 percentage point, this month to 20.75 percent yesterday, according to Standard Chartered Plc data compiled by Bloomberg. Yields on Nigerian notes due April 2017 dropped 62 basis points to 12.86 percent, according to data from the Abuja-based Financial Market Dealers’ Association compiled by Bloomberg.

The cedi weakened 13 percent against the dollar this year and traded unchanged at 2.18 against the U.S. currency by 4:03 p.m. in Accra.

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