T-Bill Subscription Blooming Amid Covid-19 Spike

Last week, T-bills remained oversubscribed, with the subscription rate coming in at 271.5 percent down from 358.2 percent the previous week.

The highest subscription rate was on the 91-day paper which came in 746.9 percent, down from 948.1 percent recorded the previous week.

The subscription for the 182-day paper also declined to 107.8 percent from 273.7 percent recorded the previous week, while the subscription of the 364-day paper increased to 245.1 percent from 206.7 percent recorded the previous week.

The oversubscription is partly attributable to increased liquidity in the money market with the average interbank rate coming in at 1.8 percent from 1.9 percent recorded the previous week.

“We note that banks continue to prefer government securities as opposed to lending, with their holdings in Government domestic debt rising to 54.9 percent from 54.1 percent as at the start of the year,” said analysts from Cytonn Investments.

The yields on the 91-day, 182-day, and 364-day papers declined by 26.3 bps, 23.5 bps, and 23.6 bps respectively to 6.0, 6.5, and 7.5 percent, attributable to the high liquidity in the money market and increased investments in government securities from financial institutions as they shy away from lending.

The acceptance rate increased to 69.8 percent, from 53.8 percent recorded the previous week, with the government accepting 45.2 billion shillings of the 65.2 billion shillings worth of bids received, higher than the weekly offered amount of 24.0 billion shillings.

The Bonds

The National Treasury recently reopened 3 fixed coupon treasury bonds, FXD1/2020/05, FXD2/2018/10, and FXD1/2019/15 with effective tenors of 5 years, 10 years and 15 years respectively, for budgetary support purposes. The period of the sale is from 6^th July 2020 to 21^st July 2020.

The coupon rates for the bonds are 11.7, 12.5, and 12.9 percent, for the 5-year, 10-year, and 15-year bonds, respectively.

“Our recommended bidding ranges are 10.5 – 10.6 percent for the 5-year bond, 11.7 – 11.8 percent for the 10-year bond, and 12.3 – 12.4 percent for the 15-year bond, given that bonds with similar tenors are currently trading at 10.6, 11.6 and 12.3 percent, respectively,” Cytonn added.

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Money Markets

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 yields on the 91-day T-bill declined by 0.3 percent points to close the week at 6.0 percent, from 6.3 percent recorded the previous week.

The average yield of Top 5 Money Market Funds recorded marginal gains to 10.0 percent from 9.9 percent recorded the previous week.

The yield on the Cytonn Money Market remained unchanged at 10.5 percent similar to what was recorded the previous week.

READ: T-Bill Subscription Ups To 245.6% Amidst Covid Spike