T-Bill Subscriptions Remain High as Kenya Eurobonds Decline

T-bills subscriptions remained high during the week increasing to 209.2 percent from 157.5 percent recorded the previous week according to Cytonn Investments Report.

Subscription rates for the 91, 182 and 364-day papers came in at 381.5, 255.5 and 94.1 percent respectively compared to 209.2, 155.0 and 139.3 percent the previous week respectively.

The 364-day paper was undersubscribed during the week as investor preference was skewed towards 91 and 182-day papers with investors remaining short in duration due to uncertainties in the interest rates environment.

Yields on the 91 and 364-day papers remained unchanged at 8.5 and 10.9 percent respectively while that of the 182-day paper declined by 10 bps to 10.3 percent from 10.4 percent the previous week.

The overall acceptance rate was at 85.6 percent compared to 75.7 percent the previous week an indication that the market has reacted to the government’s efforts to maintain the yields low by bidding at rates equivalent to the accepted weighted average yields.

The government accepted 43.0 billion shillings of the 50.2 billion shillings worth of bids received against the 24.0 billion shillings on offer in this auction, an indication of the governments’ appetite for funds to bridge the budget deficit.

According to Bloomberg, yields on the 5-year and 10-year Eurobonds, with 2.1 years and 7.1 years to maturity declined by 10 bps w/w for both bonds, to close at 3.7 percent and 6.2 percent from 3.8 percent and 6.3 percent the previous week respectively.

Since the mid-January 2016 peak, yields on the Kenya Eurobonds have declined by 5.1 percent points and 3.4 percent points for the 5-year and 10-year, respectively, due to stable macroeconomic conditions.

The declining Eurobond yields and Standard & Poor’s (S&P) having maintained Kenya’s foreign and local currency sovereign credit ratings for the short and long term at “B+/B”, respectively, are indications that Kenya remains stable and hence an attractive investment destination.