Last week, T-Bill subscription slightly dropped but maintained its dominance above the 100 percent mark.
The overall subscription rate stood at 122.8 percent, a slight drop from 137.5 percent recorded the previous week.
Government payments and favourable liquidity in the market have supported the continuous oversubscription of the T-Bills.
The ongoing demonetization process has triggered an increased liquidity in the money markets triggered by the rush to exchange old currency notes with the new generational notes.
The yields on the 91-day and 182-day papers declined by 9.8 and 10 percentage points to 6.4 and 7.2 percent respectively.
The yield on the 364-day paper rose by 11.4 percentage points to 9.2 percent during the week.
The acceptance rate for the T-Bills rose to 90.3 percent from 72.7 percent, recorded the previous week.
The government of Kenya accepted 26.6 billion shilling during the week of the 29.5 billion shillings worth of bids received.
The 26.6 billion shillings accepted by the government were higher than the weekly quantum of 24 billion shillings.
During the week, the 91 and 182-dsy papers recorded lower subscription to 103.7 and 63.9 percent from 205.2 and 77.6 percent recorded the previous week.
At the same time, the 364-day paper recorded an improved subscription to 189.5 percent from 170.4 percent the previous week.
Government Bonds For August
The government of Kenya is set to issue a 10-year bond (FXD 3/2019/10) and reopen a 20-year bond (FXD 3/2019/20) for 50 billion shillings needed for budgetary support.
The government has adopted the approach of a blinded issue of a medium-tenor and long-tenor bind to plug into the budget deficit while at the same time reduce the maturity risk.
According to Cytonn Investments, investors are expected to maintain a bias towards the 10-year bond as the recent trends driven by the perception that risks may not be adequately priced on the longer end of the yield curve.
In the money markets, bonds with 10-year and 20-years of maturity are trading at yields of 11.5 and 12.6 percent.
“We expect the bids for the FXD 3/2019/10) and (FXD 1/2019/20) to come in at 11.5-11.7 percent and 12.6-12.8 percent,” said analysts from Cytonn Investments.
Still in the money markets, 3-month bank placements ended the week at 8.6 percent.
91-day T-Bill closed the week at 6.4 percent, the average of top 5 Money Market Funds at 10.1 percent.
Cytonn Money Market Fund closed the week at 11.0 percent per annum.