Treasury Bills Subscription Declines During the Week

Treasury bills subscription declined during the week to 207.3% from 246.5% the previous week due to reduced subscriptions of the 91-day T-bill to 278.6% from 339.4% according to the weekly Cytonn Investments Report.

Subscriptions for the 182-day and 364-day T-bill increased to 201.8% and 165.2% during the week, respectively, from 99.3% and 150.5% the previous week.  According to the report, investors seem a bit indifferent with investing among the three tenors, an indication that the rates are expected to have stabilized and the pricing is right on a risk-adjusted basis.

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The yields on the other hand declined marginally with this week’s rates coming in at 8.2%, 10.3% and 11.7% for the 91, 182 and 364-day T-bills, respectively, compared to 8.3%, 10.4% and 11.7%, the previous week.

The 91-day T-bill is currently trading below its 5-year average of 10.5%, having witnessed significant stability in the last two months with the rate only declining slightly week on week. This is in line with our interest rates outlook where we expect interest rates to remain stable for the better part of 2016, and in our view, the rates have bottomed out at the current levels.

The report indicates that yields on the 5-year and 10-year Eurobonds issued in 2014 have declined 125 bps and 147 bps, respectively since their peak in mid-January 2016 on account of improving macro-economic conditions.

Week on week, the rates declined to 6.0% and 7.7% from 6.3% and 8.0%, respectively, following

1. The release of the 2015 GDP economic growth figures, with Kenya recording a 5.6% GDP growth,
2. The tempering of political rhetoric around the upcoming elections as both sides of the divide signalled some willingness to discuss the way out of the current gridlock.

The National Treasury during the week cited positive feedback following the conclusion of the Eurobond roadshow. Given the short period to the end of the financial year, we think proceeds of the Eurobond will be used to finance the budget in the next fiscal year.

Article by Juma Fred.