Last week, T-bills remained oversubscribed, with the subscription rate coming in at 245.6 percent up from 188.4 percent the previous week.
The oversubscription rate of the T-Bills, according to Cytonn Investments’ weekly report, was partly attributable to the continued preference for shorter-dated papers by investors.
The subscription rates for the 91-day, 182-day, and 364-day papers increased to 412.0, 140.3 and 284.4 percent, respectively, from 334.4, 130.6, and 187.8 percent, recorded the previous week.
The yields on the 91-day, 182-day, and 364-day papers declined by 39.0 bps, 34.9 bps, and 47.4 bps, respectively, to 6.7, 7.4, and 8.2 percent, respectively.
The acceptance rate declined to 23.3 percent, from 32.6 percent recorded the previous week, with the government accepting only 13.8 billion shillings of the 59.0 billion shillings worth of bids received.
There is a reduced borrowing pressure, with the Government having met their FY’2019/2020 borrowing target of 409.0 billion shillings as highlighted by the Governor of the Central Bank of Kenya in his post-monetary committee press conference on 26th June 2020.
In the money markets, 3-month bank placements ended the week at 7.5 percent (based on what we have been offered by various banks).
The yield on the 91-day T-bill declined by 0.4 percentage points to close the week at 6.7 percent, from 7.1 percent recorded the previous week.
The average yield of Top 5 Money Market Funds remained unchanged at 9.9 percent similar to what was recorded the previous week.
The yield on the Cytonn Money Market remained unchanged at 10.6 percent, similar to what was recorded the previous week.
Rates in the fixed income market have remained relatively stable as the government rejects expensive bids according to the report by Cytonn.
“We believe that the uncertainty affecting the global financial markets brought about by the novel Coronavirus will make it harder for the government to access foreign debt, and might result in investors attaching a high-risk premium on the country,” said Cytonn.
As a result of depressed revenue collection with the revenue target for FY’2020/2021 at 1.9 trillion shillings, Cytonn expects a higher budget deficit, which the Treasury estimates at 7.5 percent of GDP, creating uncertainty in the interest rate environment as additional borrowing from the domestic market will be required to plug in the deficit.