Bloomberg News

Ghana 5-Year Bond May Yield 14% on Inflation, Databank Says

June 29, 2011

June 29 (Bloomberg) -- Ghana’s five-year borrowing costs are poised to fall to 14 percent at the first auction of the debt in 3 1/2 years as inflation pressures ease, according to Databank Financial Services Ltd.

“Slowing inflation gives support to stabilizing the currency,” Sampson Akligoh, an economist at the Accra-based brokerage, said by phone yesterday. “With a stable currency, investors know they can cash back their investments at any time without the value being eroded.”

Ghana last sold a five-year bond in June 2007 at a yield of 15 percent, according to data compiled by Bloomberg. An issue that will mature in December yields 14.47 percent and another bond due in December 2012 is 13.67 percent.

Inflation slowed for the third consecutive month to 8.9 percent in May, from 9 percent in April, the Ghana Statistical Service said June 15. The domestic currency, the cedi, strengthened 3.9 percent against the dollar after it depreciated to its weakest since at least 1994 in February, according to data compiled by Bloomberg. It strengthened less than 0.1 percent to 1.5163 per dollar by 12:34 p.m. in Accra, the capital.

“An environment of volatile exchange rates is what puts investors off,” Emmanuel Nambware, a bond trader at Standard Chartered Plc’s Ghanaian unit, said by phone yesterday. He projected five-year borrowing costs at 13.5 percent.

The Bank of Ghana will sell 300 million cedis ($197.7 million) of the debt to raise money for roads in Accra and Kumasi, the second-biggest city, Adams Nyinaku, head of treasury at the central bank said by phone yesterday. The date of the sale will be decided by the end of the week, he said.

--Editors: Emily Bowers, Philip Sanders, Ana Monteiro.

To contact reporter on this story: Moses Mozart Dzawu in Accra at mdzawu@bloomberg.net.

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net.


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