T-Bills continued being under-subscribed for the second week during the sessions last week according to a weekly report from Cytonn Investments.
The overall subscription rate of T-Bills last week came in at 66.8 percent, an increase from 51.5 percent recorded the previous week.
The subdued performance of T-Bills is partly attributable to tighter liquidity in the interbank market, as evidenced by the increase in the interbank rate to 4.1 percent as at 22nd October from 3.8 percent at the close of the previous week.
However, liquidity improved throughout the week, with inter-bank rate recording 3.0 percent as at the close of the week.
The subscription rate for the 364-day paper increased to 105.6 percent from 49.6 percent the previous week, while the subscription rate for the 91-day and 182-day papers declined to 61.0 percent and 30.3 percent from 95.8 percent and 35.8 percent recorded the previous week.
The yields on the 91-day paper remained unchanged at 7.5 percent, while the yields on the 182-day and 364-day papers declined to 8.4 percent and 9.5 percent from 8.5 percent and 9.6 percent the previous week.
The acceptance rate for T-bills improved to 100.0 percent from 97.4 percent recorded the previous week, with the government accepting 16.0 billion shillings.
Government Bond
The Kenyan Government re-opened the 15-year Treasury bond, issue No. FXD 2/2018/15, that closed last week with a coupon rate of 12.75 percent with the period of sale ending on 30th October 2018. The government seeks to raise 32.0 billion shillings for budgetary support.
The issuing of longer-term bonds is in a bid to lengthen the average time to maturity for the Kenyan Government’s debt portfolio. The Central Bank of Kenya (CBK), in their Financial Sector Stability Report 2017, identified the continued shortening of debt maturities as posing potential rollover risks in the medium term if the trend is not reversed, having reduced to 4.1 years as at the end of 2017, from 4.5 years at the end of 2016, and highs of 8.9 years as at 2010.
Analysts at Cytonn are of the view that the continued issuance of medium to long-term domestic securities is well guided as lengthening the average maturity will reduce the pressures on the domestic debt market.
Given that the Treasury bonds with the same tenor as FXD2/2018/15 are currently trading at a yield of 12.6 percent, market analysts expect bids to come in at between 12.6 percent and 12.8 percent.