T-Bills Remain Oversubscribed During the Week Due to Improved Liquidity

T-bills remained oversubscribed during the week, with the overall subscription rate increasing to 130.6 percent from 116 percent recorded the previous week.

According to Cytonn Investments, the continued oversubscription is attributable to favorable liquidity in the market supported by government payments that offset the tax payments.

The yields on the 91-day and 364-day paper remained unchanged at 6.9 percent and 9.3 percent respectively, while the yield on the 182-day papers increased by 0.1 percent points to 7.7 percent from 7.6 percent recorded the previous week.

The acceptance rate declined to 35.1 percent from 62.2 percent recorded the previous week, with the government accepting a total of 11 billion shillings of the 31.3 billion shillings worth of bids received, lower than the weekly quantum of 24 billion shillings.

READ ALSO: T-Bills Sustained an Oversubscription Last Week as Liquidity Became Favorable 

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.

The 364-day recording improved subscription to 274.2 percent from 261.1 percent the previous week. The subscription rates for the 91-day and 182-day papers also increased to 26.7 percent and 28.5 percent from 22.6 percent and 8.1 percent recorded the previous week, respectively.

The re-opened bonds for the month of June, issue numbers (FXD1/2012/15) and (FXD1/2018/15) with effective tenors of 8.4 years and 13.9 years were oversubscribed, with the performance rate coming in at 214 percent.

The market had a bias towards the FXD1/2018/15 bond that had been issued in 2018 generating total bids of 45.8 billion shillings as investors eyed the higher yield with its coupon at 12.7 percent.

The accepted yields for the FXD1/2012/15 and FXD1/2018/15 came in at 11.6 percent and 12.5 percent in line with our expectations.

The acceptance rate for the issue came in at 45.5 percent with the Government accepting 38.9 billion shillings of the 85.6 billion shillings worth of bids received, signaling reduced appetite for domestic debt for the current financial year as the government snubbed expensive bids, being currently ahead of its domestic borrowing target.

In the money markets, 3-month bank placements ended the week at 9.0 percent (based on what we have been offered by various banks), 91-day T-bill at 6.9 percent, average of Top 10 Money Market Funds at 9.4 percent, with the Cytonn Money Market Fund closing the week at 11.0 percent.

Liquidity

During the week, the average interbank rate declined to 3.2 percent, from 4.1 percent recorded the previous week, pointing to improved liquidity conditions in the money market supported by government payments, which offset tax remittances during the week.

This saw commercial banks’ excess reserves coming in at 15.4 billion shillings in relation to the 5.25 percent cash reserve requirement (CRR).

The average volumes traded in the interbank market also declined by 26.9 percent to 4.4 billion shillings, from 6.0 billion shillings the previous week.

READ ALSO: May in Focus: T-Bills Registered an Overall Under-subscription 

Kenya Eurobonds

The yield on the 10-year Eurobond issued in 2014 remained unchanged at 6.1 percent, while that of the 5-year declined by 0.7 percent points to 5.0 percent from 5.7 percent recorded the previous week.

For the February 2018 Eurobond issue, yields on the 10-year and 30-year Eurobond both gained by 0.1 percent points to 7.5 percent and 8.6 percent, respectively, from 7.4 percent and 8.5 percent recorded the previous week.

For the newly issued dual-tranche Eurobond with 7-Years and 12-years tenor, priced at 7.0 percent for the 7-year tenor and 8.0 percent for the 12-year tenor, respectively, the yield on the 7-year bond remained unchanged at 7.0 percent while the 12-year bond declined by 0.2 percent points to 7.8 percent from 8.0 percent recorded the previous week.