T-Bills Subscription Hits 210% Last Week as Liquidity Dips to 4.1%

T-bills were oversubscribed last week with the subscription rate coming in at 210.5 percent up from 186.1 percent the previous week.

The subscription rates for the 91, 182 and 364-day papers came in at 21.9, 173.5, and 322.9 percent compared to 230.0, 117.1, and 237.6 percent respectively the previous week.

According to Cytonn Investments weekly report, the 364-day paper continued to receive the most interest from investors, having recorded the highest subscription rate of the 3 papers this week, at 322.9 percent from 237.6 percent the previous week as investors seek to lengthen duration.

Yields on the 91- day paper remained unchanged at 7.9 percent while yields on the 182 and 364-day papers declined to 10.1 percent and 10.9 percent from 10.2 percent and 11.1 percent the previous week.

The acceptance rate for T-bills declined to 40.5 percent from 47.7 percent the previous week, with the government accepting a total of 20.5 billion shillings of the 50.5 billion shillings worth of bids received. The acceptance was against the 24.0 billion shillings that were on offer.

The acceptance rate continued to decline due to the government cutting down on local borrowing since it is currently 34.7 percent ahead of its pro-rated domestic borrowing target for the current fiscal year, having borrowed 377.6 billion shillings against a target of 280.4 billion shillings.

For the month of June 2018, the Kenyan Government has issued a new 25-year Treasury bond (FXD 1/2018/25) with the coupon set at 13.4 percent, in a bid to raise 40.0 billion shillings for budgetary support. The sale period ends on 19th June, and we shall give our view on a bidding range in next week’s report.

The average interbank rate declined to 4.1 percent from 5.4 percent the previous week, attributed to increased participation by large banks trading at lower rates, while the average volumes traded in the interbank market increased by 34.6 percent to 21.8 billion shillings from 16.2 billion shillings the previous week.

The decline in the average interbank rate also points to improved liquidity, which can be attributed to the government’s reduced borrowing appetite as evidenced by the 40.5 percent acceptance rate in the T-bill auction this week.

The government’s reduced borrowing appetite has resulted in banks holding excess cash, which is likely to trickle down to the private sector.