Subscription on T-Bills Rose to 312.1 Percent in the Month of February

Subscriptions on Treasury bills increased in the month of February, with overall subscriptions at 312.1% compared to 138.4% in January according to a report by Cytonn Investments.

The Report says that yields on T-bills declined by 240 bps, 250 bps and 120 bps for the 91-day, 182-day, and 364-day bills closing the month at 9.3%, 11.9%, and 13.3%, down from 11.7%, 14.4%, and 14.5%, respectively, at the end of January 2016. The interbank rate declined by 2.9% to 4.2% at the end of February from 7.1% in January.

The decline in yields was as a result of:

1. The government’s intention to reduce the budget by Ksh. 93.8 bn leading to a reduction on the domestic borrowing for the 2015/16 fiscal year by Ksh. 53.3 billion,
2. The relatively attractive returns in the government bond market.
3. High liquidity in the money market as a result of high government maturities of Ksh. 71.0 billion in February, following another Ksh. 86.0 billion in January.
4. The increase in portfolio allocation to fixed income due to uncertainty in the equities markets.

Last week there was a decline in the treasury bills subscription levels but remained high at 174.9%, compared to 312.2% the previous week. Yields continued on their downward trend, with the 91-day, 182-day and 364-day papers coming in at 9.1%, 11.3%, 12.8%, down from 9.3%, 11.9%, and 13.3%, respectively.

During the month the government reopened a 5-year and 10-year Treasury bond (FXD 1/2015/5 and FXD1/2012/10) to raise Kshs 25 bn for budgetary support. There was a 226.1% performance rate for the bonds, with total subscriptions of Kshs 56.5 bn, of which they accepted Kshs 30.3 bn. The yields came in at 13.9% and 14.3% for the 5 and 10-year, respectively. The rates were significantly lower than the same bonds issued in January, and this can be attributed to the high liquidity in the money market and the willingness of the investors to lengthen duration.

Read more about the same on the Cytonn Investments website.