The Bank of Ghana will sell a three-year bond to raise GH¢300 million from both domestic and foreign investors at an auction to be held today.

A strong take-up of the issue by foreign investors will provide some cushioning to the Central Bank’s reserves, which have dwindled as it supplied dollars to meet growing foreign exchange demand.

The interest on the bond looks set to be higher than the 15% coupon rate paid on the last issue of similar tenor in February. More than half of the bids at that sale were received from offshore investors.

Part of the Central Bank’s strategy to shore-up the cedi has been to engineer higher yields on Treasuries to turn investors away from the foreign exchange market. At the last auction of bills on May 18, the yield on the 91-day paper rose to 17.4%, the highest since February 2010.

The 182-day bill, as well as the one- and two-year notes, touched two-year highs at the auction.

The local currency started the week 0.6% weaker against the dollar, recording an overall year-to-date depreciation of 11% according to the average quotation by banks. In the forex bureau market, the cedi has depreciated by more than 15% since the start of the year.

Its decline has triggered an aggressive response by the Bank of Ghana, which has upped its policy lending rate by a cumulative 200 basis points this year to 14.5%, fearing the weak currency could stir up inflationary pressure.

Inflation gained 0.2 percentage points to 8.8% in the first quarter of the year, and increased by another 0.3 percentage points to 9.1% in April.