Average Interbank Rate Declined to 2.6% as T-Bills Sustain Oversubscription

The average interbank rate declined to 2.6 percent from 3.8 percent the previous week according to a weekly report released by Cytonn Investments.

The average volumes traded in the interbank market rose by 17.7 percent to 3.5 billion shillings from 3.0 billion shillings the previous week.

The decline in the interbank rate points towards favorable liquidity conditions, driven partly by government payments, which offset tax remittances by banks.

T-bills recorded an oversubscription during the week, with the subscription rate rising to 198.9 percent from 156.9 percent recorded the previous week.

The oversubscription of the T-Bills was partly attributable to improved liquidity conditions in the money market during the week as evidenced by the declining interbank rate that averaged 2.6 percent during the week, lower than the 3.8 percent recorded in the previous week.

The yields on the 91-day papers rose by 86.0 bps to 7.7 percent while those of 182-day and 364-day papers dropped by 4.4 bps and 3.0 bps to 8.2 percent, and 9.4 percent respectively.

The acceptance rate for T-bills rose to 73.3 percent from 63.5 percent the previous week, with the government accepting 35.0 billion shillings of the 47.7 billion shillings worth of bids received.

The subscription rate for the 91-day paper declined to 68.4 percent from 76.7 percent recorded the previous week, while that of the 182-day and 364-day papers rose to 90.6 percent and 359.3 percent from 79.6 percent and 266.2 percent recorded the previous week.

During the sessions last week, investors’ participation remained skewed towards the longer dated paper. The demand for the longer-dated paper is attributable to the scarcity of newer short-term bonds in the primary market.

The newly issued 25-year (IFB1/2019/25) infrastructure bond for the month of March was undersubscribed at an overall subscription rate of 58.8 percent attributable to the duration risk associated with long-term papers.

The yield came in at 12.7 percent, in line with Cytonn’s expectations of 12.5 – 12.7 percent. The government accepted 16.3 billion shillings out of the 29.4 billion shillings worth of bids received.

The Central Bank of Kenya has offered 50.0 billion shillings, translating to an acceptance rate of 55.5 percent indicating that bids were largely not within ranges the CBK deemed acceptable.