During the week, T-bills were undersubscribed, with the overall subscription rate coming in at 34.2 percent compared to 46.7 percent recorded the previous week due to relatively tight liquidity in the money market.
According to Cytonn Report, the tight liquidity was due to the heavy transfer of taxes from banks and reverse repo maturities that came in at 29.0 billion shillings and 17.4 billion shillings respectively.
The subscription rates for the 91, 182 and 364-day papers came in at 12.7, 13.7, and 63.3 percent respectively compared to 41.8, 45.9 and 49.5 percent respectively the previous week.
Yields on the 91-day paper declined to 8.0 percent from 8.1 percent while that of the 182-day paper rose to 10.4 percent from 10.3 percent with that of the 364-day paper remaining unchanged at 11.0 percent.
The overall acceptance rate came in at 87.4 percent compared to 97.6 percent the previous week, with the government accepting a total of 7.2 billion shillings of the 8.2 billion shillings worth of bids received, against the 24.0 billion shillings on offer in this auction.
The government is still behind its domestic borrowing target for the current fiscal year, having borrowed 67.5 billion shillings against a target of 134.1 billion shillings.
Liquidity in the money market remained tight during the week with a net liquidity withdrawal of 6.8 billion shillings compared to a net injection of 12.0 billion shillings the previous week.
The withdrawal was brought about by liquidity reductions of 29.0 billion shillings and 20.1 billion shillings in the transfer of taxes from banks and T-bill primary issues, respectively.
Injections of 30.1 billion shillings in government payments and 24.0 billion in reverse repo purchases were not enough to counter the high reductions during the week.
The average interbank rate rose to 7.5 percent from 6.8 percent recorded the previous week, and the average volumes traded in the interbank market decreased by 7.4 percent to 24.3 billion shillings from 26.1 billion shillings the previous week. Of note is that this week, the banks’ holding of excess liquidity improved to 3.8 billion shillings above the 5.25 percent requirement, from a shortfall of 1.5 billion shillings the previous week.