T-Bill Subscription hits 250.2 Percent on account of Favorable Liquidity

T-bills recorded an oversubscription last week according to stats compiled by Cytonn Investments in their weekly report.

The subscription rate for T-Bills rose to 250.2 percent from 183.7 percent recorded the previous week attributed to favorable liquidity in the market.

The yields on the 91-day papers declined by 10 bps to 7.4 percent from 7.5 percent recorded the previous week.

The yields on the 182-day and 364-day papers declined by 1.5 bps and 2.3 bps to 8.2 percent and 9.4 percent respectively.

The acceptance rate improved to 70.9 percent from 69.3 percent recorded the previous week, with the government accepting 42.7 billion shillings of the 60.2 billion shillings worth of bids received, higher than its weekly quantum of 24.0 billion shillings.

The subscription rate for the 91-day paper declined to 107.2 percent from 167.4 percent recorded the previous week, while that of the 182-day and 364-day papers rose to 102.6 percent and 456.5 percent from 73.4 percent and 300.5 percent.

Investors’ participation remained skewed towards the longer dated paper, with the continued demand being attributable to the scarcity of newer short-term bonds in the primary market.

Related Content:

• T-Bills Close Quarter 1 of 2019 on an Oversubscription Note
• Average Interbank Rate Declined to 2.6% as T-Bills Sustain Oversubscription

Treasury Bonds 

For the month of April, the Kenyan Government has issued 10-year (FXD 2/2019/10) and 20-year (FXD 1/2019/20) Treasury bonds, both with market determined coupon rates, in a bid to raise 50.0 billion shillings for budgetary support.

“We expect the 10-year bond to generate more interest in the primary market with most investors avoiding the longer-tenor (20-year) bond due to the relatively flat yield curve on the long-end due to saturation of long-term bonds, coupled with the duration risk associated with long-term papers,” said Cytonn.

Given that the Treasury bonds with the same tenor as the FXD 2/2019/10 & FXD 1/2019/20 are currently trading at yields of 12.1 and 12.7 percent, “we expect bids to come in at 12.1 – 12.3 percent and 12.7 – 12.9 percent for the 10-year and 20-year bonds.”

Liquidity

The market remained relatively liquid with the average interbank rate coming in at 3.2 percent which was a marginal rise from 2.8 percent recorded the previous week.

The marginal rise was due to demand as banks raised funds for tax payments with Pay as You Earn (PAYE) due on Tuesday 9th April.

The average volumes traded in the interbank market rose by 23.0 percent to 3.6 billion shillings from 2.6 billion shillings the previous week.

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