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T-Bills Undersubscribed as Liquidity Remains Tight in Last Week’s Trading

BY Juma · January 31, 2017 06:01 am

T-Bills

T-bills were undersubscribed for the 5th consecutive week, with overall subscription coming in at 76.6 percent compared to 82.5 percent recorded the previous week according to Cytonn Investments in their weekly report.

There is continued preference for shorter term papers as seen from the subscription rates of the 91, 182 and 364-day papers which came in at 146.0, 84.6 and 22.3 percent respectively from 123.3, 93.1 and 44.6 percent respectively the previous week.

Despite the low subscription rates, the government has remained disciplined and is not accepting expensive money from the market as can be seen by an acceptance rate, which came in at 74.4 percent of the total bids received.

Yields on the 91-day and 182-day T-bills remained unchanged during the week, closing at 8.7 and 10.5 percent respectively while yields on the 364-day T-bill declined by 10 bps to 10.9 percent from 11.0 percent the previous week.

The Bond

The Treasury re-opened a bond, FXD 2/2007/15 with an effective time to maturity of 5.4 years, seeking to raise 30.0 billion shillings for budgetary support.  The auction was however cancelled, an indication that either:

  • investors bid at yields which the CBK considered unrealistically above market, or
  • subscription rates for the bond were low as a result of the tight liquidity that has characterized the money market since the beginning of the year.

The tight liquidity in the money market has been mainly as a result of CBK mop up activities in order to support the shilling. This is the second time since the beginning of the year that we have seen CBK cancel an auction, following the auction for a 364-day T-bill that was cancelled at the beginning of the year.

Liquidity

Liquidity remained tight in the market leading to the Central Bank of Kenya (CBK) participating in the reverse repo market, injecting 10.0 billion shillings during the week at an average rate of 10.1 percent.

The interbank rate remained stable at 8.3 percent and the volumes transacted increased to 15.9 billion shillings from 12.7 billion shillings transacted the previous week; the interbank rate is often determined by the liquidity distributions within the banking sector as opposed to the net liquidity position in the interbank market.

Below is a summary of the money market activity during the week:

cyt1

Juma is an enthusiastic journalist who believes that journalism has power to change the world either negatively or positively depending on how one uses it. (020) 528 0222 or Email: info@sokodirectory.com

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