T-Bills Cross Into March With Neck Above Water Level

Just like January, T-Bills ended the month of February with an oversubscription with analysts from Cytonn Investments saying the trend is likely to persist in the month of March.

During the month of February, T-bill auctions recorded an oversubscription, with the overall subscription rate coming in at 211.8 percent, compared to 164.1 percent recorded in the month of January 2020, attributable to favorable liquidity in the money market.

The subscription rates for the 91-day paper recorded a decline to 70.3 percent from 86.2 percent recorded in January.

The subscription rates for the 182-day and 364-day papers, however, were on a rise, coming in at 88.2 percent and 391.9 percent higher than the 50.0 percent and 230.5 percent recorded in January, respectively.

“We note that there is continued pent up demand for the 364-day paper, having recorded the highest subscription rate of the 3 papers, which we attribute to the market having a bias to the shorter-dated papers to avoid duration risk,” said Cytonn in a report.

Given the scarcity of shorter-dated bonds in the primary market due to the government issuing medium-term and longer-dated papers in a bid to increase the debt maturity profile, this has seen most investors still keen on the primary fixed income market, finding the 364-day T-bill more attractive on a risk-adjusted return basis.

The yields on the 91-day and 182-day papers both recorded increases of 0.1 percentage points to close at 7.3 percent and 8.3 percent respectively. The yield on the 364-day paper, however, recorded a decline of 20 bps, to close at 9.8 percent in February.

The Central Bank remained disciplined in rejecting expensive bids given that it is currently 49.4 percent ahead of its domestic borrowing target, with the T-bills acceptance rate declining to 53.1 percent during the month, as compared to 84.2 percent recorded in January, with the government accepting a total of 107.9 billion shillings of the 203.3 billion shillings worth of bids received.

During the week, T-bills were oversubscribed, with the subscription rate coming in at 226.6 percent up from 207.3 percent the previous week.

The oversubscription is partly attributable to favorable liquidity in the money market evidenced by the average interbank rate declining to 4.1 percent from 4.2 percent the previous week, on the back of government payments.

The yield on the 91-day paper remained unchanged at 7.3 percent while the yields on both the 182-day and 364-day papers declined by 0.1 percentage points to close at 8.2 percent and 9.7 percent respectively.

The acceptance rate declined to 27.6 percent, from 69.8 percent recorded the previous week, with the government accepting only 15.0 billion shillings of the 54.4 billion shillings bids received attributable to reduced pressure given that the government is currently 49.4 percent ahead of its pro-rated domestic borrowing target.

READ: T-Bills Hit The Roof During The First Week Of February