T-bills were under-subscribed last week, with the overall subscription rate coming in at 51.5 percent, a decline from 63.7 percent recorded the previous week.
The subdued performance is partly attributable to the 15-year tenor primary bond sale that closed this week, on 16th October 2018, amidst tighter liquidity in the interbank market, which has seen the interbank rate increase to 3.8 percent as at 19th October 2018, from 3.5 percent as at 15th October 2018.
The subscription rate for the 182-day paper increased to 35.8 percent from 26.4 percent the previous week, while the subscription rate for the 91-day and 364-day papers declined to 95.8 percent and 49.6 percent from 157.6 percent and 63.4 percent, recorded the previous week.
The yields on the 182-day and 364-day papers remained unchanged at 8.5 percent and 9.6 percent, respectively, while the yield on the 91-day paper declined by 10 bps to 7.5 percent, from 7.6 percent the previous week.
The acceptance rate for T-bills declined marginally to 97.4 percent from 99.3 percent, the previous week, with the government accepting 12.0 billion shillings of the 12.4 billion shillings worth of bids received, against the 24.0 billion shillings on offer.
The newly issued 15-year Treasury bond for the month of October, (FXD 2/2018/15), was undersubscribed at an overall subscription rate of 67.6 percent. Analysts from Cytonn Investments attribute the continued low-performance of long-term bonds to the relatively flat yield curve on the long-end as compared to the relatively steep short-end of the yield curve, making it unattractive to hold longer-term bonds.
The yield came in at 12.7 percent, in line with our expectations of 12.6 – 12.8 percent lower than the May bond issue, (FXD1/2018/15), with a similar tenor, which had a yield of 13.1 percent, as yields continue to decline due to the Central Bank of Kenya’s (CBK’s) efforts to keep rates low by rejecting expensive bids in the auction market.
The government accepted 7.8 billion shillings out of the 27.0 billion shillings worth of bids received against 40.0 billion shillings on offer, translating to an acceptance rate of 29.0 percent.