T-Bill Yields Continues to Decline Due to Increased Demand on High Subscription Rates

T-bills were oversubscribed during the week with the overall subscription rate coming in at 218.9 percent up from 146.0 percent, recorded the previous week.

Yields on the 91-day, 182 and 364-day papers declined by 2 bps, 20 bps, and 4 bps to 7.7 percent, 9.3 percent, and 10.4 percent, respectively.

According to the weekly report by Cytonn Investments, T-bill yields have continued to decline as a result of increased demand evidenced by the high subscription rates, attributable to improved liquidity, which saw the interbank rate decline to an average of 5.2 percent in H1’2018 compared to 7.2 percent recorded in H2’2017.

The acceptance rate for T-bills declined to 61.0 percent from 70.8 percent, the previous week, with the government accepting 32.0 billion shillings of the 52.5 billion shillings’ worth of bids received.

The subscription rates for the 91, 182 and 364-day papers increased to 61.1 percent, 123.6 percent, and 377.3 percent, compared to 18.7 percent, 77.1 percent, and 265.9 percent, respectively, the previous week as investors’ participation remain skewed towards the longer-dated papers.

For the month of July 2018, the Kenyan Government has issued a new 20-year Treasury bond (FXD 2/2018/20) with the coupon set at 13.2 percent, in a bid to raise 40.0 billion shillings for budgetary support.

The government has been trying to increase its local debt maturity profile, having issued a 25-year bond in June, the longest tenor since 2014.

The average term to maturity for all government securities has been on the decline, hitting 4.4 years as at April 2018 from an average of 6.2 years in 2009 as stated in the Medium Term Debt Management Strategy for 2018 to 2021, which can expose the government to refinancing risks due to the high maturities of short-term debt expected in the 2018/2019 Financial Year.