T-Bills End October In The Red But Slightly Above September

By Cytonn Investments / Published November 2, 2020 | 7:47 am

During the month of October, T-bill auctions recorded an undersubscription, with the overall subscription rate coming in at 92.0 percent, a rise from 58.4 percent recorded in September.

The subscription rates for the 91-day, 182-day, and 364-day papers all increased to 146.9, 51.2, and 110.8 percent respectively, from 107.1, 34.9, and 62.5 percent recorded in September.

The yields on the 91-day increased to 6.7 percent from 6.3 percent while the 182-day and 364-day papers to 7.0 and 7.9 percent respectively from 6.8 and 7.7 percent recorded the previous month.

The T-bills acceptance rate declined to 91.5 percent compared to 94.8 percent recorded in September, with the government accepting a total of 101.0 billion shillings of the 110.4 billion shillings worth of bids received.

During the week, T-bills remained undersubscribed, with the subscription rate coming in at 72.1 percent down from 81.4 percent the previous week.

The subscription rates for the 91-day and 182-day papers declined to 74.9 and 33.1 percent respectively, from 103.6 and 72.3 percent, while the 364-day paper rose to 110.1 from 81.7 percent. The acceptance rate declined to 95.5 percent from 97.4 percent the previous week.

The yields on the 91-day and 364-day papers increased marginally to 6.7 and 7.9 percent respectively, from 6.6 and 7.8 percent recorded last week, while the 182-day paper remained unchanged at 7.0 percent.

The Economy

The Kenyan economy recorded a 5.7 percent contraction in Q2’2020 down from a growth of 5.3 percent recorded in a similar period of review in 2019. This was the first contraction since the Q3’2001 when the country recorded a 2.5 percent contraction.

The overall performance was cushioned by growths in Agriculture, Forestry, and Fishing activities which grew by 6.4 percent; Financial and Insurance activities, 1.7 percent; Construction, 3.9 percent; Real Estate Activities, 2.2 percent, and Mining and Quarrying activities, 10.0 percent.

Accommodation & tourism and the Education sectors were the hardest hit, declining by 83.3 and 56.2 percent respectively.

During the month, there was a continued downward readjustment on the yield curve, which saw the FTSE NSE Kenya Government Bond Index gain by 0.5 percent, taking the YTD performance to a 2.8 percent gain.

The downward readjustment is mainly attributable to increased demand, due to the bias by banks towards government securities as opposed to lending due to increased credit risk.

The Money Markets

In the money markets, 3-month bank placements ended the week at 7.2 percent while the yield on the 91-day T-bill increased marginally to 6.7 from 6.6 percent recorded the previous week.

The average yield of Top 5 Money Market Funds increased marginally by 0.1 percentage points to 10.1 from 9.9 percent recorded the previous week.

The yield on the Cytonn Money Market decreased marginally by 0.1 percentage points to 10.5 from 10.6 percent recorded the previous week.

READ: T-Bills End The Month Of August In The Red: Is There Hope For September?