T-Bills Sustained The Over-subscription Trend Last Week

T-bills remained over-subscribed last week, with the overall subscription rate coming in at 198.3 percent, an increase from 167.4 percent recorded the previous week.

The continued over-subscription in the primary auctions in 2019 has been attributed to improved liquidity in the market, driven by debt maturities as well as government payments.

There was mixed performance, with the 91-day and 182-day papers recording an increase in subscription rates to 83.4 and 149.3 percent, from 59.7 and 81.0 percent recorded the previous week.

The 364-day paper subscription rate declined marginally to 293.2 percent from 296.9 percent recorded the previous week.

The yields on the 91-day, 182-day, and 364-day papers declined to 7.0, 8.6 and 9.6 percent from 7.1, 8.8 and 9.9 percent recorded the previous week, respectively.

The acceptance rate declined to 60.8 percent from 80.5 percent recorded the previous week, with the government accepting 28.9 billion shillings of the 47.6 billion shillings worth of bids received.

Reopened Bonds

The reopened 2-year (FXD1/2019/2) and 15-year (FXD1/2019/15) Treasury bonds recorded an oversubscription of 555.0 percent.

The oversubscription of the bonds was attributed to the 2-year bond, which attracted bids totaling to 50.2 billion shillings out of the 66.6 billion shillings bids received for the entire auction, an indication of the pent up demand in the shorter-term papers. The yields came in at 10.3 percent and 12.8 percent for the 2-year and 15-year bonds, respectively.

The government accepted 23.4 billion shillings out of the 66.6 billion shillings worth of bids received against 12.0 billion shillings on offer, translating to an acceptance rate of 35.2 percent indicating that bids were largely not within ranges the Central Bank of Kenya (CBK) deemed acceptable.

For the month of February, the Kenyan Government has issued a 5-year and 10-year Treasury bond, with issue No’s. FXD 1/2019/5 and FXD 1/2019/10, respectively, with market-determined coupon rates, in a bid to raise 50 billion shillings for budgetary support.

Kenyan Shilling

During the week, the Kenya Shilling appreciated by 0.5 percent against the US Dollar, recording a 9-month high to close at 100.1 shillings, from 100.6 shillings recorded the previous week.

The Kenya Shilling has appreciated against the US Dollar by 1.7 percent year to date, and in “our view, the shilling should remain relatively stable to the dollar in the short term.”

The shilling will be aided by the narrowing of the current account deficit to 5.1 percent in the 12-months to November 2018, from 6.5 percent in November 2017.

The narrowing deficit has been attributed to improved agriculture exports, increased diaspora remittances, strong receipts from tourism and slower growth in imports due to lower food and SGR–related equipment imports and the decline in international oil prices.

There has been an improving diaspora remittance, which increased by 38.6 percent in 2018 to USD 2.7 billion from USD 1.9 billion recorded in 2017.

The rise in diaspora remittances has been attributed to increased uptake of financial products by the diaspora due to financial services firms and new partnerships between international money remittance providers and local commercial banks making the process more convenient.

There are also high levels of forex reserves, currently at USD 8.1 billion, equivalent to 5.3-months of import cover, compared to the one-year average of 5.1-months and above the EAC Region’s convergence criteria of 4.5-months of imports cover.