During the month of October, T-bill auctions recorded an undersubscription, with the overall rate coming in at 84.5 percent compared to 105.4 percent recorded in the month of September 2019.
The subscription rates for the 91-day during the month of October came in at 122.0 percent which was lower than the 128.6 percent recorded in September.
The subscription rates for the 182-day and 364-day came in at 27.1 percent and 195.5 percent higher than the 23.5 percent and 127.3 percent recorded in September respectively.
The yields on the 91-day increased by 0.1 percentage points to 6.4 percent from 6.3 percent while the yield on the 182-day paper and 364-day paper recorded no change in the yields remaining stable at 7.2 percent and 9.8 percent respectively in October.
The T-bills acceptance rate came in at 71.4 percent during the month, compared to 67.9 percent recorded in September.
The Central Bank remained disciplined in rejecting expensive bids in order to ensure the stability of interest rates.
During the week, T-bills were oversubscribed, with the subscription rate coming in at 114.3 percent up from 72.8 percent the previous week.
The oversubscription is partly attributable to favorable liquidity in the money market during the week.
The yield on the 91-day, 182-day, and 364-day papers remained unchanged at 6.4, 7.2 and 9.8 percent.
The acceptance rate dropped to 86.5 percent from 94.3 percent recorded the previous week, with the government accepting 23.7 billion shillings of the 27.4 billion shillings bids received.
The 91-day T-bill is currently trading at a yield of 6.4 percent which is below its 5-year average of 8.6 percent.
The lower yield on the 91-day paper is mainly attributable to the low-interest-rate environment that has persisted since the passing of the law capping interest rates.
For the month of October, the National Treasury issued a tax-exempt 16-year 60.0 billion shillings infrastructure bond (IFB1/2019/16) with market-determined coupon rates for the purpose of financing the infrastructure projects in the FY 2019/20 budget estimates.
The bond was oversubscribed as per our expectations due to its tax-free incentive that translates to higher returns, receiving bids totaling 86.9 billion shillings of the 60.0 billion shillings on offer, translating to a subscription rate of 144.9 percent.
The weighted average rate of accepted bids was at 12.4% in line with our expectations of 12.3 – 12.5 percent.