T-Bill Subscription Dips Slightly But Still Above 150%

During the week, T-bills remained oversubscribed, with the subscription rate coming in at 188.4 percent, down from 290.5 percent the previous week.

The oversubscription, according to Cytonn Investments, is partly attributable to the continued favorable liquidity in the money markets, as well as the continued preference for shorter-dated papers by investors.

After the reduction of the both the CRR and the CBR, the rate was intended to increase liquidity in the market for onward lending to the private sector but due to the ongoing uncertainties in the financial markets, the lending is yet to pick and hence partly the reason for the high liquidity in the money market.

The subscription rates for the 91-day paper increased to 334.4 percent from the 294.0 percent recorded the previous week, while subscription for the 182-day and 364-day papers declined to 130.6 and 187.8 percent from 265.0 and 314.7 percent recorded the previous week.

The yields on the 91-day, 182-day, and 364-day papers declined by 17.0 bps, 32.1 bps, and 36.3 bps to 7.1, 7.7, and 8.7 percent respectively.

The acceptance rate declined marginally to 32.6 percent from 32.8 percent recorded the previous week, with the government accepting only 14.7 billion shillings of the 45.2 billion shillings worth of bids received.

On the primary bond auction, the period of sale for the reopened five-year and ten-year bonds, FXD3/2019/5 and FXD4/2019/10 closed on Tuesday, 16^th June 2020.

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The issue was oversubscribed with the average subscription rate coming in at 262.8 percent as the government received bids worth 105.1 billion shillings higher than the 40.0 billion shillings offered.

Key to note, investor preference was biased towards the FXD3/2019/5, with a shorter tenor, receiving bids worth 60.9 billion shillings compared to the FXD4/2019/10, which received 44.2 billion shillings worth of bids.

The preference towards the shorter tenor paper can be attributed to investors avoiding the duration risk associated with longer-dated papers.

Yields on the bonds came in at 11.5 and 12.5 percent for the five and ten-year bonds respectively, which was in-line with our expectations of a range between 11.4 – 11.6 percent for FXD3/2019/5 and 12.3 – 12.5 percent for FXD4/2019/10.

The government rejected high bids only accepting 49.3 billion shillings out of the 105.1 billion shillings worth of bids received, translating to an acceptance rate of 46.9 percent.

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