T-Bills Oversubscribed Last Week As Government Remains Ahead of Domestic Borrowing

T-bills were oversubscribed last week with the subscription rate coming in at 183.1 percent up from 165.7 percent the previous week.

The subscription rates for the 91, 182 and 364-day papers came in at 82.7, 78.6, and 327.8 percent compared to 120.8, 150.8, and 198.4 percent respectively 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 364-day paper continued to receive the most interest from investors, having recorded the highest subscription rate of the 3 papers this week of 327.8 percent from 198.4 percent the previous week, as investors seek to lengthen duration.

The acceptance rate for T-bills declined to 69.7 percent from 91.2 percent the previous week, with the government accepting a total of 30.6 billion shillings of the 43.9 billion shillings worth of bids received, against the 24.0 billion shillings on offer.

The government is currently 31.0 percent ahead of its pro-rated domestic borrowing target for the current fiscal year, having borrowed 345.0 billion shillings against a target of 263.3 billion shillings.

For the month of May 2018, the Kenyan Government has issued a new 15-year Treasury bond (FXD 1/2018/15) with the coupon set at 12.7 percent, in a bid to raise 40.0 billion shillings for budgetary support.

Given that:

• The government is currently 31.0 percent ahead of its pro-rated domestic borrowing target, and has collected 72.9 percent of its total foreign borrowing target,
• The KRA is not significantly behind the target, having collected 91.2 percent of its half-year 2017/18 target,

Analysts at Cytonn Investments don’t expect the government to come under pressure to borrow during the current fiscal year, neither do they expect upward pressure on interest rates during the same period.

Treasury bonds with the same tenor are currently trading in the secondary market at a yield of 13.0 percent with the average yield expected to come in between 13.0 percent and 13.3 percent.