T-Bills were oversubscribed by 124.4 percent, compared to 85.3 percent last week at Thursday’s auction.
Yields on the 182 and 364-day papers remained unchanged at 10.7 percent and 11.2 percent, respectively, while the yield on the 91-day paper declined to 8.0 percent from 8.1 percent the previous week.
The Central Bank of Kenya (CBK) raised KES.25Bn from an offered KES 24Bn amount.
Market analyst at Genghis Capital said the subscription was driven by maturity of expensive short-term deposits taken in by banks in December.
The local unit closed at 103.10 and we expect it to remain firm as money market liquidity tightens around the end of the Cash Reserve Ration (CRR) – the number of funds that the banks have to keep with the Repo rate- cycle on Friday.
“It remains to be seen how it holds up against end month demand in the coming week. The secondary market remains focused around the IFBs and the 10-year space. Investors are still looking to pick shorter dated infrastructure bonds at premium rates above market in hopes of panic sales when the news of this month’s issue is announced,” noted the analysts.
Stephanie Kimani, Research Economist, Commercial Bank of Africa Limited said there is ample, but skewed liquidity conditions that are characterizing the interbank market.
“Despite improving liquidity conditions in the past few weeks, the Central bank has continued to inject liquidity into the market perhaps in an effort to ease liquidity constraints. The injection of additional funds into the interbank market has led to a decline in the weighted average overnight rate to 6.57 percent from 7.65 percent a week earlier,” she said in a weekly brief.
Stephanie also observed that Treasury yields are expected to mildly tick higher as investors demand a premium. “However, this will not only be capped at 14.00 percent but will be subject to the government’s willingness to absorb domestic debt at higher rates considering it has fallen behind its debt target for the fiscal year 2017/18.”