T-Bills Spikes During The Week Despite Decline in Acceptance Rate

T-bills were oversubscribed during last week’s sessions with the overall subscription rate coming in at 181.1 percent up from 148.7 percent recorded the previous week.

The yield on the 91-day T-Bill remained unchanged at 7.6 percent while the yields on the 182-day and 364-day papers declined by 0.1 percent points to 8.8 percent and 9.7 percent from 8.9 and 9.8 percent recorded the previous week, respectively.

The acceptance rate for T-bills declined to 59.8 percent from 76.7 percent recorded the previous week, with the government accepting a total of 26.0 billion shillings of the 43.5 billion shillings worth of bids received.

The subscription rate for the 91-day and 182-day papers improved to 182.9 percent and 170.9 percent from 64.0 percent and 126.2 percent recorded the week, respectively, while the subscription on the 364-day paper declined to 181.1 percent from 205.1 percent the previous week.

For the month of September, the Kenyan Government has re-opened 2 bonds, FXD 1/2018/10 and FXD 2/2018/20, with 10-years and 19.9-years to maturity, and coupon rates of 12.7 percent and 13.2 percent respectively.

The government will be seeking to raise 40.0 billion shillings for budgetary support. Analysts at Cytonn Investments expect the 20-year tenor bond to have a lackluster performance compared to the 10-year bond. This is due to the relatively flat yield curve on the long-end considering the current uncertainties in the interest rate environment, with the 20-year bond having had a performance rate of 34.7 percent on its initial auction in July compared to the 74.6 percent subscription rate for the 10-year bond in August.

These Treasury bonds are currently trading at yields of 12.5 percent and 12.8 percent in the secondary market, respectively.

As such market analysts at Cytonn see the average yield of the bonds coming in between 12.5 percent and 12.7 percent for the FXD 1/2018/10 and between 12.8 percent and 13.1 percent for the FXD 2/2018/20.