Annual T-Bill Subscription Hit 130% Last Year

During the year 2020, the T-bills auction recorded an oversubscription with the average subscription rate coming in at 130.3 percent compared to an average of 118.7 percent in 2019.

The yields on the 91-day, 182-day, and 364-day T-bills declined to 6.9, 7.4, and 8.3 percent in 2020 from 7.2, 8.2, and 9.8 percent at the end of 2019, respectively.

“This is mainly attributed to the CBK’s efforts to keep rates low by rejecting expensive bids in the auction market as well as increased demand as Banks shied away from lending to the public due to the increased credit risk,” says Cytonn.

Primary T-bond auctions in 2020 were oversubscribed with the subscription rate averaging 130.6 percent, which was higher than the 109.7 percent average subscription rate in 2019.

The market maintained a bias towards the medium-term bonds mainly driven by the perception that risks may not be adequately priced on the longer end of the yield curve.

The average acceptance rate declined by 0.7 percentage points to 68.5 percent in 2020, from the 69.2 percent recorded in 2019, as the market adjusted to the efforts of the CBK to maintain the rates at low levels by rejecting expensive bids.

The secondary bond market recorded increased activity with the turnover has increased by 7.8 percent to Kshs 661.2 bn from Kshs 613.2 bn in 2019.

‘This is attributable to local institutional investors increasing their allocation to treasury bonds as they sort for stable returns, after increased volatility in other asset classes,” said Cytonn Investments in their report.

In 2020, the yield curve steepened during the year, readjusting downwards for the shorter-dated papers but adjusting upwards for the longer-dated papers.  The FTSE NSE bond index increased by 2.6 percent to close the year at 98.0 from 95.5 at the end of 2019.

As 2021 starts, analysts say T-Bills might not be so lucky due to the uncertainty among investors especially with the new strain of Covid-19 now hitting the UK.

What should the markets expect this year?