Treasury Bills Oversubscribed As Interbank Rate Rises to 6.6%

Treasury bills were oversubscribed last week with the overall subscription rate coming in at 116.8 percent compared to 79.9 percent recorded the previous week.

The subscription rates for the 91, 182 and 364-day papers came in at 99.6, 138.1, and 102.4 percent compared to 42.4, 99.4, and 75.4 percent respectively the previous week.

Yields on the 91 and 182-day papers remained unchanged at 8.0 percent and 10.6 percent respectively while the yield on the 364-day paper rose to 11.2 percent from 11.1 percent the previous week.

The overall acceptance rate rose to 91.5 percent compared to 84.9 percent the previous week with the government accepting a total of 25.6 billion shillings of the 28.0 billion shillings worth of bids received against the 24.0 billion shillings on offer.

The government is still behind its domestic borrowing target for the current fiscal year, having borrowed 135.1 billion shillings against a target of 236.7 billion shillings (assuming a pro-rated borrowing target throughout the financial year of 410.2 billion shillings).

If the domestic borrowing target is revised downwards to 293.8 billion shillings as per the 2018 Budget Policy Statement (BPS), the pro-rated target comes in at 169.5 billion shillings meaning the government will still be behind on its borrowing target but marginally.

The move to cut domestic borrowing could be aimed at reducing pressure on interest rates from investors in the domestic market who are bidding for higher yields, and instead, increase borrowing from the foreign market.

The usage of the Central Bank overdraft facility remains high as it stands at 47.0 billion shillings compared to a nil overdraft at the beginning of this fiscal year.

The average interbank rate rose to 6.6 percent from 6.1 percent recorded the previous week, while the average volumes traded in the interbank market rose by 31.2 percent to 15.0 billion shillings from 11.5 billion shillings the previous week, indicating the uneven distribution of liquidity in the market.

SOURCE Cytonn Report