T-Bills Under-subscribed for the Sixth Week Running

T-bills were under-subscribed last week for the sixth week running, with the overall subscription rate coming in at 23.8 percent, down from 46.0 percent recorded the previous week.

The under-subscription was attributable to the 10-year tenor bond sale that closed during the week, as well as tightened liquidity in the interbank markets, which saw the interbank rate, hit 11.3 percent as at 14th December 2018, the highest recorded since 30th October 2015.

The subscription rate for the 91-day and 182-day papers declined to 23.3 percent and 16.1 percent, from 172.8 percent and 9.9 percent recorded the previous week, respectively.

Subscription rate for the 364-day paper rose marginally to 31.7 percent from 31.5 percent recorded the previous week.

The yields on the 91-day, 182-day, and 364-day remained unchanged at 7.3, 8.2 and 9.6 percent respectively. The acceptance rate declined to 95.0 percent from 96.2 percent recorded the previous week, with the government accepting 5.4 billion shillings of the 5.7 billion shillings worth of bids received.

The newly issued 10-year Treasury bond (issue FXD 2/2018/10) was undersubscribed at an overall subscription rate of 72.2 percent.

The yield came in at 12.5 percent in line with our expectations. The government accepted 26.2 billion shillings out of the 28.9 billion shillings worth of bids received, against 40.0 billion shillings on offer, translating to an acceptance rate of 90.6 percent.

The issuance of medium to long-term securities have continued having a lackluster performance, which we attribute to the saturation of long-end offers, leading to a relatively flat yield curve on the long-end.