What Are Debt Securities?
Debt securities are fixed-income investments where you lend money to a company or government entity for a predetermined period at a fixed interest rate. The borrower is legally obligated to pay you regular interest payments and return your principal amount at maturity.
In Ghana's investment landscape, debt securities include corporate bonds, government bonds, commercial papers, and other fixed-income instruments that provide predictable returns with lower risk compared to equity investments.
Key Advantage
Debt securities provide capital preservation and predictable income streams, making them ideal for conservative investors seeking stable returns with lower volatility.
How You Earn Returns
Interest Payments (Coupons)
Receive regular interest payments at predetermined rates and intervals, typically semi-annually or annually.
Principal Repayment
Get your initial investment amount back at maturity, providing full capital recovery if held to term.
Example Return Calculation
Investment: GHS 10,000 in 3-year corporate bond at 12% annual interest
Annual Interest: GHS 1,200 (12% of GHS 10,000)
Total Interest Over 3 Years: GHS 3,600
Principal at Maturity: GHS 10,000
Total Return: GHS 13,600 (36% total return over 3 years)
Types of Debt Securities
Government Bonds
Issued by Bank of Ghana. Lowest risk with moderate returns. Include Treasury Bills and Government Bonds.
Corporate Bonds
Issued by companies. Higher returns than government bonds but with increased credit risk.
Commercial Papers
Short-term unsecured promissory notes, typically with maturities of less than one year.
Municipal Bonds
Issued by local government authorities for infrastructure and development projects.
Key Features and Benefits
Predictable Income
Fixed interest payments provide steady, predictable cash flow
Capital Preservation
Principal amount is guaranteed if held to maturity
Priority in Liquidation
Bondholders are paid before equity shareholders if company fails
Tradeable
Can be bought and sold on secondary markets before maturity
Understanding Credit Ratings
Credit ratings assess the creditworthiness of bond issuers and help investors understand the risk level:
High Grade (AAA-BBB)
Investment grade bonds with low default risk
Speculative (BB-B)
Higher yields but increased credit risk
High Risk (CCC-D)
Junk bonds with significant default risk
Risks to Consider
Credit Risk
Risk that the issuer may default on interest payments or principal repayment.
Interest Rate Risk
Bond values decline when interest rates rise, affecting market value before maturity.
Inflation Risk
Fixed interest payments lose purchasing power if inflation exceeds the interest rate.
Liquidity Risk
Some bonds may be difficult to sell quickly without affecting the price significantly.
Quick Facts
Legal Framework
Debt securities in Ghana are governed by:
- • Securities Industry Act, 2016
- • Bank of Ghana Act, 2016
- • Companies Act, 2019 (Act 992)
- • Ghana Stock Exchange Rules
- • SEC Regulations
Market Information
Current Rates
Government bonds: 15-25%
Corporate bonds: 18-30%
Trading
Ghana Stock Exchange
Primary Dealer Network