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

T-bills remained oversubscribed last week, with the overall subscription rate declining to 116.0 percent from 129.4 percent recorded the previous week.

The continued oversubscription is attributable to favorable liquidity in the market supported by government payments.

The yields on the 91-day and 182-day papers both declined by 0.1 percentage points to 6.9 and 7.6 percent from 7.0 and 7.7 percent recorded the previous week. The yield on the 364-day paper remained unchanged at 9.3 percent.

The acceptance rate declined to 62.2 percent from 91.9 percent recorded the previous week.

The government accepted a total of 17.3 billion shillings of the 27.8 billion shillings worth of bids received.

The bids received were lower than the weekly quantum of 24.0 billion shillings as the government is currently under no borrowing pressure being 17.1 percent ahead of the FY’2018/2019 borrowing target.

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 261.1 percent from 210.5 percent the previous week.

The subscription rates for the 91-day and 182-day papers declined to 22.6 percent and 8.1 percent from 146.1 and 46.4 percent recorded the previous week, respectively.

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, an average of Top 10 Money Market Funds at 9.3 percent, with the Cytonn Money Market Fund closing the week at 11.1 percent.

The Interbank Rate

During the week, the average interbank rate declined to 3.9 percent, from 4.7 percent recorded the previous week.

The decline in interbank rate pointed to improved liquidity conditions in the money market supported by government payments, which saw commercial banks’ excess reserves coming in at 14.5 billion in relation to the 5.25 percent cash reserves requirement (CRR).

The average volumes traded in the interbank market also declined by 31.7 percent to 7.6 billion shillings from 11.1 billion shillings the previous week.