Amin Adam questions government bond pricing as short-term yields fall below inflation

A government bond market helps set borrowing costs for the state and returns for investors. When a 91-day Treasury bill yields less than inflation, investors lose purchasing power if they hold it to maturity. The rate also becomes a weaker signal of normal market pricing. This matters because yields should help show inflation, monetary policy, and risk conditions.

At the October 12, 2026 auction, the 91-day bill yielded 4.60%, while September inflation was 5.2%. Its yield was also far below the 14% policy rate and the 10.50% yield on the Bank of Ghana’s 14-day bill. The difference suggests unusually strong demand for very short government paper, rather than pricing driven only by monetary policy.

Dr Mohammed Amin Adam described this as evidence of financial repression at the short end. He urged the government and Bank of Ghana to coordinate issuance, publish predictable calendars, explain their instruments, and use transparent, market-based auction pricing.

A Treasury bill is a government security used to borrow money for a short period. Investors provide funds and receive repayment at maturity, with the return reflected in the bill’s yield. Because the government issues it, the bill is also an important reference point for short-term interest rates and market confidence.

The main difference is time. A 91-day bill matures after about three months. A 364-day bill matures after almost one year. The longer bill exposes investors to conditions over a longer period, including changing inflation, interest rates, and perceived credit risk. Those differences can produce different yields.

In Ghana, the 91-day bill yielded 4.60% at the October 12, 2026 auction. The 364-day bill yielded about 9.8% at the end of September. That contrast showed a much lower return at the very short end and a positive real return on the longer bill.

The gaps show how far the 91-day Treasury bill rate had moved from other key rates. Comparing yields in percentage points makes the differences clear without confusing them with percentage changes. A large gap can signal that the instrument is being priced by forces other than the central bank’s stated monetary stance.

The 91-day bill yielded 4.60%, compared with 5.2% inflation. It was therefore 0.60 percentage points lower than inflation. Against the Bank of Ghana’s 14% policy rate, the gap was 9.40 percentage points. Against the central bank’s 14-day bill at 10.50%, the gap was 5.90 percentage points.

The article presents these differences as evidence of stronger financial repression at the very short end of the yield curve. Dr Amin Adam said captive liquidity demand may be driving the price, making the rate less reliable as a measure of credit and duration risks.

An investor’s real return measures how much purchasing power an investment adds after inflation. A positive real return means the investment grows faster than prices. A negative real return means the investor receives a nominal gain but loses purchasing power because prices rise more quickly.

For the 91-day bill, the nominal yield was 4.60% and September inflation was 5.2%. The simple difference was about negative 0.6 percentage points. For the 364-day bill, the yield was about 9.8%. Subtracting 5.2% inflation produced an approximate positive real return of 4.6 percentage points.

This contrast helps explain the concern about Ghana’s short-term market. Investors accepting 4.60% were not being compensated for inflation on the figures given. Investors holding the 364-day bill received a positive inflation-adjusted return. The different outcomes also showed that pricing was especially unusual at the shortest maturity.

When yields stay low because institutions must buy or have few alternatives, prices may stop reflecting ordinary market judgments. Investors can earn less than inflation and receive inadequate compensation for holding government debt. The rate then becomes a poor guide to the risks attached to lending to the state.

In Ghana’s case, the 91-day bill yielded 4.60%, below 5.2% inflation and far below the 14% policy rate. Strong demand for very short paper may allow the government to borrow at a low cost. But that cheap funding does not necessarily mean the underlying credit or duration risks are equally low.

This situation can weaken the information carried by the yield curve. If regulations or institutional pressure change, demand may not remain as strong. The government and Bank of Ghana therefore need coordinated issuance, predictable calendars, transparent auction results, and market-based pricing to rebuild confidence.

Banks and other institutions do not always choose investments only by comparing yields. Regulations may require them to hold approved assets. Liquidity requirements may also encourage instruments that can be converted into cash or used to meet short-term obligations. These pressures can create demand even when returns are unattractive.

The article also identifies limited alternatives and institutional pressure. If few suitable investments are available, or if managers are expected to support government financing, institutions may continue buying Treasury bills. That demand can push prices up and yields down. The result is a rate shaped partly by captive liquidity rather than by normal market competition.

This helps explain why the 91-day bill yielded 4.60%, below 5.2% inflation. Such buying can help the government secure funding, but it may distort the signal from the yield curve. Dr Amin Adam urged clearer issuance plans and transparent, market-based auctions.

A yield curve is a line showing the yields investors demand for government debt at different maturities. It helps compare short-term and longer-term borrowing costs. A healthy curve gives information about expected inflation, future interest rates, and the risks of lending for different lengths of time.

Maturity matters because money is committed for longer periods. Inflation expectations can push longer yields higher if investors fear purchasing-power losses. Monetary policy strongly influences short-term rates, while perceived credit risk can raise yields across maturities. Together, these forces normally create a pattern that reflects market expectations and compensation for risk.

Ghana’s curve looked unusual at the shortest end. The 91-day bill yielded 4.60%, compared with about 9.8% for the 364-day bill, 10.50% for the 14-day central-bank bill, and 14% for the policy rate. Dr Amin Adam called for rebuilding the curve through predictable, transparent, market-based issuance.