During the month of February, T-bill auctions recorded an oversubscription, with the average subscription rate coming in at 133.3 percent, compared to 97.5 percent recorded in January.
According to a report released by Cytonn Investments Limited, the subscription rates for the 91, 182 and 364-day papers came in at 121.4, 121.2 and 150.2 percent from 97.5, 111.4 and 83.5 previous month, respectively.
The yield on the 91-day paper remained flat at 8.0 percent while the yields on the 182 and 364-day papers declined by 20 bps and 10 bps to 10.4 percent and 11.1 percent from 10.6 percent and 11.2 percent respectively the previous month.
The T-bills acceptance rate came in at 89.8 percent during the month, compared to 85.5 percent in January, with the Kenyan Government accepting 113.9 billion shillings of the 128.0 billion shillings worth of bids received, indicating that bids were largely within ranges the Central Bank of Kenya (CBK) deemed acceptable.
The government is ahead of its domestic borrowing target for the current fiscal year, having borrowed 228.9 billion shillings against a target of 200.3 billion shillings.
Last week, T-bills were oversubscribed, with the overall subscription rate coming in at 155.8 percent, compared to 104.7 percent recorded the previous week.
Subscription rates for the 91, 182, and 364-day papers came in at 192.3, 163.3, and 133.7 percent from 124.2, 84.3, and 117.3 percent the previous week respectively.
Yields on the 91, 182 and 364-day T-bills remained unchanged during the week at 8.0, 10.4, and 11.1 percent respectively.
The 91-day T-bill is currently trading below its 5-year average of 9.2 percent. The lower yield on the 91-day paper is mainly attributable to the low interest rate environment we have been experiencing since the passing of the law capping interest rates.
Analysts at Cytonn expect this to continue in the short-term, given:
- The discipline of the CBK in stabilizing interest rates in the auction market by rejecting aggressive bids that are priced above market, for both T-bills and T-bonds.
- The government being under no pressure to borrow from the local market as it is currently ahead of its domestic borrowing target, and from the foreign markets where it has met approx. 105.0 percent of its prorated target.