Markets in Focus: April Records Oversubscription in T-Bill Auctions

During the month of April, T-bill auctions recorded an oversubscription, with the average subscription rate coming in at 115.7 percent a decline from 141.2 percent recorded in March.

The subscription rates for the 91, 182 and 364-day papers came in at 68.5, 109.1 and 141.1 percent from 102.9, 126.4 and 171.8 percent the previous month respectively.

The yields on the 91 and 364-day papers remained flat 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 month.

The T-bills acceptance rate came in at 87.9 percent during the month, compared to 86.9 percent in March, with the Kenyan Government accepting a total of 97.6 billion shillings of the 111.0 billion shillings worth of bids received, indicating that bids were largely within ranges the Central Bank of Kenya (CBK) deemed acceptable.

The government is currently ahead of its domestic borrowing target for the current fiscal year, having borrowed 324.1 billion shillings against a target of 251.8 billion shillings.

Last week, T-bills were oversubscribed with a subscription rate coming in at 136.8 percent compared to 106.1 percent recorded the previous week.

Yields on the 91, 182 and 364-day papers remained unchanged at 8.0, 10.3 and 11.1 percent respectively. The acceptance rate increased to 81.1 percent from 76.7 percent the previous week, with the government accepting 26.6 billion shillings of the 32.8 billion shillings worth of bids received.

The 91-day T-bill is currently trading at 8.0 percent which is 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 experienced since the passing of the law capping interest rates.

“We expect this to continue in the short-term, given (i) 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, and (ii) the government is 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. 86.1 percent of its prorated target,” stated analysts from Cytonn Investments Limited.