T-Bills Oversubscribed as Government Remains Ahead of its Domestic Borrowing

Treasury bills were oversubscribed last week, with the overall subscription rate coming in at 107.0 percent, from an under subscription of 52.8 percent recorded the previous week.

The subscription rates for the 91, 182 and 364-day papers came in at 73.9, 71.6, and 155.6 percent compared respectively to 44.1, 37.5, and 71.5 percent, respectively, the previous week.

Yields on the 91 and 364-day T-bills remained unchanged at 8.0 percent and 11.1 percent respectively, while the yield on the 182-day paper declined by 10 bps to 10.3 percent, from 10.4 percent the previous week.

The overall acceptance rate increased to 99.4 percent compared to 92.9 percent the previous week, with the government accepting a total of 25.5 billion shillings of the 25.7 billion shillings worth of bids received, against the 24.0 billion shillings on offer.

The government is currently 20.3 percent ahead of its domestic borrowing target for the current fiscal year, having borrowed 275.3 billion shillings, against a target of 228.9 billion shillings (assuming a pro-rated borrowing target throughout the financial year of 297.6 billion shillings).

During the week, liquidity levels declined in the money market as indicated by the rise in the average interbank rate to 6.3 percent, from 5.8 percent recorded the previous week, owing to government security principal payments for the T-bond tap sale and T-bills, both value dated 2^nd April 2018.

There was an increase in the average volumes traded in the interbank market by 40.1 percent to 20.7 billion shillings, from 14.8 billion shillings the previous week.

According to Bloomberg, the yield on the 5-year Eurobond issued in June 2014 increased by 10 bps to 3.6 percent from 3.5 percent, while the yield on the 10-year Eurobond declined by 20 bps to 5.7 percent, from 5.9 percent the previous week.

Since the mid-January 2016 peak, yields on the Kenya Eurobonds have declined by 5.2 percent points and 3.9 percent points for the 5-year and 10-year Eurobonds, respectively, due to the relatively stable macroeconomic conditions in the country. Key to note is that these bonds currently have 1.2 and 6.2-years to maturity for the 5-year and 10-year, respectively.