T-bills were undersubscribed last week, with the overall subscription rate decreasing to 86.8 percent from 122.8 percent recorded the previous week.
The underperformance, according to Cytonn Investments, is attributable to the focus on the 2 bonds on offer for the month of August in the primary market, which closed during the week.
The yields on the 91-day paper and 364-day paper remained unchanged at 6.4 and 9.2 percent respectively, while the 182-day paper yield fell by 0.1 percentage points to 7.1 percent from 7.2 percent recorded the previous week.
The acceptance rate for all treasury bills bid increased to 99.6 percent from 90.3 percent the previous week.
The government of Kenya accepted 20.76 billion shillings of the 20.84 billion shillings worth of bids received, lower than the weekly quantum of 24.0 billion shillings.
The 91-day, 182-day, and 364-day papers recorded a downturn in subscription to 68.8, 29.4 and 151.5 percent from 103.7, 63.9 and 189.5 percent recorded the previous week, respectively.
For the month of August, the Kenyan government issued a 10-year bond (FXD 3/2019/10) and re-opened a 20-year bond (FXD 1/2019/20) for a total of 50.0 billion shillings for budgetary support.
“The accepted yields for the issue came in at 11.6 and 12.7 percent for the (FXD 3/2019/10) and (FXD 1/2019/20), respectively, in line with our expectations as highlighted in last week’s bidding ranges of 11.5 – 11.7 percent and 12.6 – 12.8 percent, for the (FXD 3/2019/10) and (FXD 1/2019/20), respectively.”
The issue was oversubscribed with the subscription rate at 134.9 percent having received 67.4 billion shillings worth of bids against the advertised amount of 50.0 billion shillings.
The market biased towards the 10-year bond that had bids amounting to Kshs 52.8 bn, mainly driven by the perception that risks may not be adequately priced on the longer end of the yield curve, which is relatively flat due to a narrowing spread between the short-term and long-term interest rates.
In the money markets, 3-month bank placements remained unchanged compared to last week, ending the week at 8.6 percent.
The 91-day T-bill was also unchanged, ending the week at 6.4 percent while the average of Top 5 Money Market Funds came in at 9.6 percent compared to 10.1 percent last week.
The Cytonn Money Market Fund closing the week at 11.1 percent compared to 11.0 percent last week.