November Favors T-Bills As Overall Subscription Comes In At 102.5%

November

T-bill auctions recorded an oversubscription, with the overall subscription rate coming in at 102.5 percent, a rise from 90.4 percent recorded in the month of October.

The highest subscription rate was in the 364-day paper, which came in at 129.2 percent, an increase from 99.3 percent recorded the previous month.

The subscription for the 182-day paper increased to 63.6 percent from 50.0 percent, while that of the 91-day paper declined to 106.2 percent from 146.7 percent recorded in the month of October.

The yield on the 91-day paper remained unchanged at 6.7 percent, while the 182-day and 364-day papers all increased by 0.2 percentage points and 0.3 percentage points to 7.2 and 8.2 percent respectively from 7.0 and 7.9 percent recorded the previous month.

The T-bills acceptance rate increased to 96.4 percent during the month, compared to 90.2 percent recorded in October, with the government accepting a total of 94.8 billion shillings of the 98.3 billion shillings worth of bids received.

Last Week

During the week, T-bills remained undersubscribed, with the overall subscription rate coming in at 45.5 percent, down from 64.3 percent the previous week.

This can be attributed to the tightening liquidity in the market as evidenced by a 0.3 percentage points increase in the average interbank rate to 3.9 percent from 3.6 percent, recorded last week.

The highest subscription rate was in the 91-day paper, which came in at 74.3 percent, down from 114.5 percent recorded the previous week.

The subscription for the 182-day paper declined to 26.9 percent from 63.7 percent, while that of the 364-day paper increased to 52.6 percent from 44.7 percent recorded the previous week.

The yields on the 91-day, 182-day, and 364-day increased by 13.1 bps, 14.0 bps, and 5.3 bps to 6.9, 7.3, and 8.2 percent, respectively.

The government continued to reject expensive bids with the acceptance rate increasing to 90.6 percent, from 87.2 percent recorded the previous week, accepting bids worth 9.9 billion shillings out of the 10.9 billion shillings worth of bids received.

The Bonds

During the month of November, The Central Bank of Kenya re-opened 2 bonds the FXD2/2013/15 and FXD1/2018/20 with coupons of 12.0 and 13.2 percent and effective tenors of 7.5 years and 17.4 years, respectively.

There was a high demand for the bond offers, with the overall subscription rate for the two bonds coming in at 140.0 percent, partly supported by the favorable liquidity in the market, and financial institutions’ bias towards the fixed income market in this period of economic uncertainty.

The government received bids worth Kshs 56.0 bn, higher than the 40.0 billion shillings offered, and accepted only 53.7 billion shillings.

Investors preferred the longer-term paper i.e. FXD1/2018/20, which received bids worth 28.9 billion shillings, representing 51.2 percent of the total bids received.

The weighted average rate of accepted bids for the two bonds came in at 11.4 and 13.3 percent, for FXD2/2013/15 and FXD1/2018/20, respectively.

The government rejected high bids only accepting 53.7 billion shillings out of the 56.0 billion shillings worth of bids received, translating to an acceptance rate of 96.0 percent.

During the month of November, there was low demand for the 25-year bond tap sale, FXD1/2018/25, with the overall subscription rate coming in at 39.8 percent.

The government accepted 7.9 billion shillings out of the 8.0 billion shillings worth of bids received, representing an acceptance rate of 99.3 percent, which can be attributed to the undersubscription.

The allocated average rate for accepted bids was 13.5 percent while the coupon rate for the bond is 13.4 percent.

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