T-bills were oversubscribed last week, with the overall subscription rate coming in at 102.2 percent, a significant increase from 57.4 percent recorded the previous week due to improved liquidity.
The Central Bank of Kenya has attributed the T-Bill oversubscription to reduced pressure on banks due to the fact they had attained the average monthly Cash Reserve Requirements threshold for the month of August.
Yields on the 91-day, 182-day, and 364-day papers remained unchanged at 7.7, 9.0 and 10.0 percent respectively.
The acceptance rate for T-bills declined to 95.8 percent from 96.8 percent the previous week with the government accepting 23.5 billion shillings of the 24.5 billion worth of bids received.
The subscription rate for the 91-day, 182-day and 364-day papers improved to 153.9, 72.8 and 110.9 percent from 15.1, 20.5 and 111.1 percent the previous week, respectively.
During the month of August 2018, the Kenyan Government has issued a new medium-term 10-year Treasury bond (FXD 1/2018/10) with a market-determined coupon rate, in a bid to raise 40.0 billion shillings for budgetary support.
The government has been issuing long-term bonds in a bid to lengthen the average time to maturity for the total debt portfolio which stood at 7.1 years as at the end of FY’2017/2018, a decline from 7.8 years as at the end of FY’2016/2017 as per data from the Medium Term Debt Management Strategy FY2018/19-FY2020/21 and FY2017/18-FY2019/20.
The government has not achieved much in lengthening their liability profile mainly due to the poor performance of the longer-dated bonds in the auction market.
Cytonn Investment has attributed the low-performance rate to the relatively flat yield curve on the long-end making it relatively unattractive to hold longer-term bonds considering the current uncertainties in the interest rate environment.
Given that the Treasury bonds with the same tenor are currently trading at a yield of 12.7 percent, ‘we expect bids to come in at between 12.7 percent and 13.0 percent,” said Cytonn.