T-Bill Subscriptions Dips to 88.2% On Account of Reduced Liquidity

T-bills were undersubscribed last week with the overall subscription rate coming in at 88.2 percent, a decline from 207.6 percent recorded the previous week.

The decline in the T-Bill subscription has been attributed to reduced liquidity which the Central Bank of Kenya (CBK) attributed to banks seeking funds for VAT remittances during last week.

Yields on the 91-day, 182-day, and 364-day papers declined by 4.8 bps, 8.3 bps, and 15.0 bps to 7.6, 9.1, and 10.1 percent respectively.

The Central Bank of Kenya (CBK) was cautious during last week and did not accept aggressive bids from the market. The acceptance rate for T-bills improved to 99.3 percent from 71.8 percent the previous week, with the government accepting 21.0 billion shillings of the 21.2 billion shillings worth of bids received.

The subscription rates for the 91-day, 182-day, and 364-day papers declined to 50.6, 58.6 and 133.0 percent from 105.9, 137.9 and 318.1 percent respectively, with the 364-day paper still recording the highest performance.

Investors’ participation remains skewed towards the longer-dated paper, which has been attributed to the lack of short-term bond issuances in the primary market leading to the shift in focus to the 364-day paper.

The Kenyan Government issued a new 20-year Treasury bond (FXD 2/2018/20) with the coupon rate set at 13.2 percent in a bid to raise 40.0 billion shillings for budgetary support. The issue had a lackluster performance, with the overall subscription rate coming in at 34.7 percent while the weighted average rate of accepted bids came in at 13.4 percent.

The government accepted 10.5 billion shillings out of the 13.9 billion shillings worth of bids received, translating to an acceptance rate of 75.8 percent.

Despite the government’s effort to increase the local debt maturity profile by issuing longer-dated bonds, there has been a low appetite for the issues.

“We attribute this to the uncertainties in the interest rate environment due to the tabling of the Finance Bill 2018 that proposes the repeal of interest rate cap, which if passed, might result into an upward pressure on the interest rate,” said Cytonn Investments.