T-Bills Still Sailing Through Njaanuary With Head High

Last week, T-bills remained oversubscribed, with the subscription rate coming in at 145.9 percent up from 118.1 percent recorded the previous week, and higher than the YTD average of 111.2 percent.

The oversubscription is attributable to improved liquidity in the market during the week, supported mainly by government payments, which partly offset tax remittances.

“We note that the 364-day paper continued to receive the most interest from investors, having recorded the highest subscription rate of the 3 papers, at 217.1 percent,” said Cytonn Investments in their weekly report.

Most investors are still keen on the primary fixed income market, finding the 364-day T-bill more attractive on a risk-adjusted return basis, compared to a two year bond with a yield of 10.4 percent.

The yields on the 91-day, 182-day, and 364-day papers increased by 4.7 bps, 4.5 bps, and 1.7 bps to 7.3, 8.2, and 9.9 percent respectively.

The acceptance rate declined to 77.0 percent from 80.1 percent recorded the previous week, with the government accepting 26.9 billion shillings of the 35.0 billion shillings worth of bids received.

The Bonds

During the month of January, the government reopened two bonds, FXD1/2019/5 and FXD1/2019/10, in a bid to raise 50.0 billion shillings for budgetary support.

The FXD1/2019/5 and FXD1/2019/10 had an effective tenor of 4.1-years and 9.1-years, and coupon rates of 11.3 percent and 12.4 percent respectively, with the overall subscription rate coming in at 139.9 percent.

“Further to this, we note that there was pent up demand on the FXD1/2019/5, which received bids worth 44.5 billion shillings of the 69.9 billion shillings worth of bids received for both bonds, in line with our expectations that investors will be attracted to the shorter-term paper due to its relatively shorter tenor, thus, reduced duration risk, coupled with the high liquidity in the market.”

The yields came in at 11.5 percent and 12.5 percent for the 5-year and 10-year bonds, respectively, with the government accepting 63.7 billion shillings out of the 69.9 billion shillings worth of bids received, translating to an acceptance rate of 91.1 percent.

“We note that this was higher than the quantum of Kshs 50.0 bn for the issue, emphasizing the government’s aggressiveness in accepting money in an effort to meet its domestic borrowing target,” said Cytonn.

READ: T-Bills Seem To Be Beating Njaanuary With An Oversubscription