Markets: Are T-Bills In The Red To Stay Forever?

Are T-Bills in the red to stay? Covid-19 seems to be taking a heavy toll on T-Bills and recovery for them seems a call too far to imagine.

During the week, T-bills remained undersubscribed, with the subscription rate coming in at 59.5 percent up from 35.6 percent the previous week

According to data from Cytonn Investments, the under-subscription is attributable to tightened liquidity in the money markets.

The subscription rate of the 91-day and 364-day papers increased to 65.5 percent and 108.6 percent respectively, from 14.3 percent and 63.4 percent recorded the previous week.

The subscription rate for the 182-day paper, however, declined to 8.1 percent from 16.3 percent received the previous week.

Investors’ participation remained skewed towards the longer 364-day paper attributable to the scarcity of shorter-dated bonds, which has seen most investors still keen to participate in 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 remained unchanged at 7.2 percent and 8.1 percent while the yield for the 364-day paper increased marginally by 10 bps to 9.1 percent, from 9.0 percent recorded the previous week.

The acceptance rate rose to 99.7 percent, from 99.3 percent recorded the previous week, with the government accepting 14.25 billion shillings of the 14.29 billion shillings bids received.

In the money markets, 3-month bank placements ended the week at 7.9 percent (based on what we have been offered by various banks).

The 91-day T-bill remained unchanged at 7.2 percent, similar to what was recorded the previous week, while the average of Top 5 Money Market Funds increased by 0.1 percentage point to 10.1 percent from 10.0 percent the previous week.

The yield on the Cytonn Money Market increased by 0.1% point to 11.1%, from 11.0% recorded the previous week.

During the week, International Monetary Fund released the first chapter of the World Economic Outlook (The Great Lockdown), where they revised Kenya’s 2020 GDP growth rate for 2020 to 1.0 percent, from the 6.0 percent growth rate projected at the beginning of the year.

The global economy is projected to contract by 3.0 percent in 2020, a worse outlook than the one seen in the 2008 – 2009 financial crisis.

READ: T-Bill Subscription Dips Below 50% As Covid-19 Continues To Bite