T-Bills Still Beating Covid-19 With An Oversubscription

During the week, T-bills remained oversubscribed, with the subscription rate coming in at 135.0 percent up from 118.7 percent the previous week, mainly supported by the high liquidity being experienced in the money markets.

The highest subscription rate was on the 91-day paper, which came in 213.0 percent, down from 396.5 percent recorded the previous week.

On the other hand, the subscription for the 182-day paper increased to 96.0 percent from 24.7 percent recorded the previous week, while that of the 364-day paper increased to 142.7 percent from 101.5 percent recorded the previous week.

The oversubscription in recent weeks has partly been attributable to the high liquidity in the money market, as well as the Bank’s preference towards government securities as opposed to lending to the private sector in the wake of the COVID-19 pandemic, which has heightened credit risk.

The yields on the 91-day paper and 182-day paper remained unchanged at 6.1 percent and 6.5 percent, similar to what was recorded the previous week, while that of the 364-day papers increased to 7.5 percent from 7.4 percent recorded last week.

The acceptance rate increased to 94.1 percent, from 82.8 percent recorded the previous week, with the government accepting 30.5 billion shillings of the 32.4 billion shillings worth of bids received, higher than the weekly quantum of 24.0 billion shillings.

The Treasury opened a tap sale for a 20-year bond, FXD2/2018/20, on the primary bond auction with an effective tenor of 18 years.

The issue was oversubscribed with the subscription rate coming in at 100.7 percent, as the government received bids worth 40.3 billion shillings, higher than the Kshs 40.0 bn offered, mainly attributable to the high liquidity in the money markets.

The yield on the bond came in at 12.9 percent. The government accepted bids at cost (with accrued interest) worth 41.0 billion out of the 40.3 billion shillings worth of bids received, translating to an acceptance rate of 101.8 percent.

For the month of August, the Government has issued a new 11-year amortized infrastructure bond namely, IFB1/2020/11 with an effective tenor of 11-years for a total value of 70.0 billion shillings for funding of infrastructure projects in the FY2020/21 budget estimates.

The bond has a coupon rate of 10.9 percent and the period of the sale ends on 18th August 2020. “We expect the bond to be oversubscribed, mainly due to the high liquidity in the market in addition to the bond’s attractiveness since it is tax-free.”

“Our recommended bidding range is 11.4 – 11.6 percent for IFB1/2020/11, given that infrastructure bonds with a similar tenor are currently trading at 11.4 percent.”

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

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 91-day T-bill remained unchanged at 6.1 percent, similar to what was recorded the previous week. The average yield of Top 5 Money Market Funds declined marginally to 10.1 percent from 10.2 percent recorded the previous week.

The yield on the Cytonn Money Market remained unchanged at 10.7 percent, similar to what was recorded the previous week.