Last week saw T-bills being undersubscribed, with the overall subscription rate coming in at 90.9 percent, a rise from 78.2 percent recorded the previous week.
The continued under subscription is attributable to the relatively tight liquidity conditions in the money market during the week due to tax payments, with Pay As You Earn (PAYE) due on the 9th of every month.
The yields on the 91-day, 182-day, and 364-day papers remained unchanged at 6.9, 8.3, and 9.5 percent respectively.
The acceptance rate for T-bills dropped to 89.4 percent, from 90.0 percent the previous week, with the government accepting 19.5 billion shillings of the 21.8 billion shillings worth of bids received.
The subscription rate for the 91-day paper and 182-day paper declined to 16.9 percent and 61.4 percent, from 73.4 percent and 77.6 percent recorded the previous week.
The subscription rate for the 364-day paper gained to 149.9 percent, from 80.8 percent recorded the previous week, with investors’ participation being skewed towards the longer dated paper.
The Interbank Rate
The average interbank rate decreased to 3.8 percent from 4.4 percent the previous week, pointing to improved liquidity in the market.
The average volumes traded in the interbank market decreased by 45.6 percent to 10.3 billion shillings, from 18.9 billion shillings the previous week.
Despite the slight improvement from the previous week, liquidity conditions remained tight attributable to tax payments with PAYE due during the week.
According to Bloomberg, the yield on the 10-year and 5-year Eurobonds issued in 2014 gained by 0.1 percentage points and 0.9 percentage points to 6.4 percent and 4.9 percent from 6.3 percent and 4.0 percent the previous week respectively.
Since the mid-January 2016 peak, yields on the Kenyan Eurobonds have declined by 3.9 percent points and 3.2 per points for the 5-year and 10-year Eurobonds, respectively, an indication of the relatively stable macroeconomic conditions in the country.
Key to note is that these bonds have 0.7-years and 5.7-years to maturity for the 5-year and 10-year, respectively.
For the February 2018, Eurobond issue, during the week, the yields on both the 10-year and 30-year Eurobonds gained by 0.2 percentage points to 7.3 percentage and 8.4 percentage, from 7.1 percent and 8.2 percent the previous week, respectively.
Since the issue date, the yield on the 10-year Eurobond has remained constant while the yield for the 30-year Eurobond has increased by 0.1 percentage points.