T-Bills Slightly Smile After Many Days Of Being Gloomy

During the week, T-bills were slightly oversubscribed, with the subscription rate coming in at 100.4 percent, up from 62.6 percent the previous week.

The oversubscription of the T-Bills was partly attributable to favorable liquidity in the market during the week, which saw the average interbank rate declining to 4.1 percent, from 4.2 percent, supported by government payments.

The subscription rate of the 91-day, 182-day, and 364-day papers increased to 191.8, 44.9, and 119.3 percent respectively, from 61.1, 38.0, and 87.8 percent recorded the previous week, respectively.

The yields on the 91-day, 182-day, and 364-day papers all remained unchanged at 7.3, 8.2, and 9.2 percent, respectively, similar to what was recorded the previous week. The acceptance rate increased to 99.5 percent, from 98.5 percent recorded the previous week, with the government accepting Kshs 24.0 bn of the Kshs 24.1 bn bids received.

During the week, the National Treasury announced that it will reopen the recently issued FXD1/2020/5 and issue a new infrastructure bond IFB1/2020/6 with effective tenors of 5-years and 6-years respectively for a total value of Kshs 30.0 bn for FXD1/2020/5 and Kshs 25.6 bn for IFB1/2020/6, for budgetary support.

The period of sale for FXD1/2020/5 is from 11^th May 2020 to 19^th May 2020, while the period of sale for IFB1/2020/6 is from 14^th May 2020 to 26^th May 2020.

“As per the historical trend, we expect the market to maintain a bias towards IFB1/2020/6 mainly attributable to its short tenor as well as the tax-free incentive for infrastructure bonds, translating to a higher return. Our recommended bidding range is 11.5 – 11.7 percent for FXD1/2020/5 and 10.5 – 10.8 percent for IFB1/2020/6 given that bonds with the same tenor are currently trading at 11.4 percent and 10.5 percent, respectively, on the yield curve,” said Cytonn in their weekly report.

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 7.3 percent, similar to what was recorded the previous week. The average yield of Top 5 Money Market Funds declined by 0.1 percentage points to 10.0 percent from 10.1 percent recorded the previous week.

The yield on the Cytonn Money Market declined by 0.2 percent points to close the week at 10.8 percent from 11.0 percent recorded the previous week.

READ: T-Bills Still Wounded By Covid-19; Any Hope Of The Wound Drying Up?