Treasury bill auctions under-subscribed on tight liquidity

Results released by Central Bank of Kenya (CBK) for the Treasury bill auctions  on Thursday were under subscribed due to reduced liquidity, which was a result of tax remittances.

“Market liquidity was relatively tight during the week due to remittance of taxes by commercial banks. There was a net liquidity withdrawal of Kshs 5.9 bn this week, compared to a net injection of Kshs 4.2 bn the previous week, with the bulk of the liquidity reduction coming from T-Bill primary issues and transfer of taxes from commercial banks at Kshs 34.4 bn and Kshs 30.3 bn, respectively,” noted Cytonn Investments.

The overall subscription rate coming in at 91.8 percent, compared to 153.5 percent recorded the previous week.

The subscription rates for the 91, 182 and 364-day papers came in at 103.0  percent, 95.5  percent, and 83.5  percent compared to 101.1 percent, 226.7  percent and 101.3  percent, respectively, the previous week.

Yields on the 91, 182 and 364-day papers remained unchanged from the previous week at 8.1  percent, 10.3  percent and 10.9  percent, respectively.

The overall acceptance rate came in at 94.1  percent compared to 93.4 percent the previous week, with the government accepting a total of Kshs 20.7 bn of the Kshs 22.0 bn worth of bids received, against the Kshs 24.0 bn on offer in this auction.

Despite this, the government is behind its domestic borrowing target for the current fiscal year, having borrowed Kshs 17.6 bn, against a target of Kshs 67.2 bn (assuming a pro-rated borrowing target throughout the financial year of Kshs 317.7 bn budgeted for the full financial year).

The deficit has been covered by an overdraft from the Central Bank, which currently stands at Kshs 27.3 bn.