T-Bills Dip After Days Of Smiling Through Covid-19

Last week, T-bills remained undersubscribed, with the subscription rate coming in at 40.4 percent down from 92.8 percent the previous week.

The undersubscription, according to a report by Cytonn was mainly due to investors’ preference to participate in the primary bond market where there was a tap-sale for the 11-year amortized infrastructure bond namely, IFB1 /2020/11, which recorded a performance rate of 145.0 percent.

The yield on the 91-day paper increased marginally to 6.3 percent, from 6.2 percent recorded the previous week, while that of the 182-day paper and 364-day papers remained unchanged at 6.6 and 7.5 percent respectively.

The acceptance rate increased to 100.0 percent, from 83.8 percent recorded the previous week, with the government accepting 9.6 billion shillings worth of bids received.

On the primary bond auction, the period of sale for the recently opened Infrastructure bond, IFB1/2020/11 with an effective tenor of 11-years, closed on 19^th August 2020.

The issue was oversubscribed in line with our expectations, with the average subscription rate coming in at 145.0%, as the government received bids worth 101.5 billion shillings, higher than the 70.0 billion shillings offered, mainly attributable to the high liquidity in the money markets, and the attractive tax-free nature of the bond.

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The market-weighted average rate for the bond came in at 11.4 percent, which was in-line with our expectations of 11.4-11.6 percent.

The government rejected high bids only accepting 78.6 billion shillings out of the 101.5 billion shillings worth of bids received, translating to an acceptance rate of 77.5 percent.

In the money markets, 3-month bank placements ended the week at 7.2 percent (based on what we have been offered by various banks), while the yield on the 91-day T-bill increased marginally to 6.3 percent, from 6.2 percent recorded the previous week.

The average yield of Top 5 Money Market Funds increased marginally to 10.1 percent from 10.0 percent recorded the previous week.

The yield on the Cytonn Money Market also increased marginally to close at 10.7%, from 10.6% recorded the previous week.

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