T-bills remained oversubscribed during the week, with the subscription rate declining to 148.1 percent from 250.2 percent recorded the previous week.
The decline in subscription rate of the T-Bills during the week was attributable to the 10-year and 20-year bond sale in the primary market that closed during the week.
The yield on the 182-day paper declined to 8.1 percent from 8.2 percent previously while the 91-day and 364-day papers remained unchanged at 7.4 and 9.4 percent respectively.
The acceptance rate improved to 79.2 from 70.9 percent recorded the previous week, with the government accepting a total of 28.1 billion shillings of the 35.6 billion shillings worth of bids received, higher than its weekly quantum of 24.0 billion shillings.
The subscription rate for the 91-day paper improved to 122.7 percent from 107.2 percent recorded the previous week.
The subscription rate for the 182-day and 364-day papers declined to 76.4 and 230.0 percent from 102.6 and 456.5 percent recorded the previous week, respectively.
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.
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Government Bonds
The newly issued bonds for the month of April, issue numbers (FXD 2/2019/10) and (FXD 1/2019/20) with 10-years and 20-years tenors, were oversubscribed, with the performance rate coming in at 171.2 percent.
The 10-year bond generated more interest, which was in line with our expectations, recording total bids of 70.9 billion shillings out of the 85.6 billion shillings worth of bids for the entire issue.
Investors continued to avoid the longer-tenor bonds due to the relatively flat yield curve on the long-end brought about by the saturation of long-term bonds, coupled with the duration risk associated with long-term papers.
The accepted yields for the 10-year and 20-year bonds came in at 12.3 and 12.9 percent in line with Cytonn Investments’ expectations of 12.1 -12.3 percent and 12.7-12.9 percent for the 10-year and 20-year bonds.
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The Interbank Rate
The market remained relatively liquid with the average interbank declining to 1.7 percent from 3.2 percent, recorded the previous week supported by Government payments.
The average volumes traded in the interbank market rose by 289.6 percent to 3.6 billion shillings from 1.6 billion shillings the previous week.
Kenyan Eurobonds
According to Bloomberg, the yield on the 10-year Eurobonds issued in 2014 rose by 0.1 percentage points to 6.2 percent from 6.1 percent.
The yields on the 5-year Eurobonds rose by 0.2 percentage points to 4.3 percent from 4.1 percent the previous week.
Since the mid-January 2016 peak, yields on the Kenyan Eurobonds have declined by 4.5 percentage points and 3.4 percent points for the 5-year and 10-year Eurobonds, respectively, an indication of the relatively stable macroeconomic conditions in the country.
For the February 2018 Eurobond issue, during the week, the yields on 10-year Eurobond remained unchanged at 7.1 percent.
The yield on the 30-year Eurobond rose by 0.1 percentage points to 8.2 percent from 8.1 percent recorded the previous week.
Since the issue date, the yields on the 10-year Eurobond has declined by 0.2 percentage points while that of the 30-year Eurobond has increased by 0.1 percentage points.