T-Bill Subscription Blooms On The First Week Of March

T-bills recorded an oversubscription last week with the overall subscription rate coming in at 141.0 percent up from 132.0 percent recorded the previous week.

The oversubscription for the second-week running was due to the increased liquidity in the money markets as a result of government payments.

The highest subscription rate was in the 364-day paper, which increased to 190.2 percent, from 151.6 percent recorded the previous week.

The increased appetite for the 364-day paper is mainly attributable to growing investor preference for medium-term papers as investors now believe the pandemic has been contained but are still worried about the possible effects of the current rising political temperatures preceding the elections in August 2022.

The subscription for the 91-day paper also increased to 176.1 percent, from 157.0 percent recorded the previous week, while the 182-day paper’s subscription rate declined to 77.7 percent, from 102.3 percent recorded the previous week.

The yields on 364-day, 182-day, and 91-day papers rose by 5.7 bps, 4.3 bps, and 9.3 bps to 9.1, 7.8, and 7.0 percent, respectively, as investors sought higher yields as the government’s demand for cash remained high.

The government accepted 89.2 percent of bids received, amounting to 30.2 billion shillings, out of the 33.8 billion shillings worth of bids received.

In the primary bonds auction, the government is seeking to raise 50.0 billion shillings for budgetary support by reopening two bonds, FXD1/2019/10 and FXD2/2018/20, with effective tenures of 8.0 and 17.4 years, respectively.

The bonds have coupons of 12.4 and 13.2 percent and are currently trading at a yield of 12.0 and 13.0 percent, respectively in the secondary market.

“Given the tightening liquidity in the market coupled with the under subscription recorded in last month’s issues, we anticipate an under a subscription and a high acceptance rate,” said Cytonn in this week’s report.

“The bonds will be on offer from 01/03/2021 to 09/03/2021 and we recommend a bidding range of 12.4-12.5 percent for FXD1/2019/10 and 13.4-13.5 percent for FXD2/2019/20,” added Cytonn.

In the money markets, 3-month bank placements ended the week at 7.9 percent while the yield on the 91-day T-bill increased by 9.3 bps to 7.0 percent.

The average yield of the Top 5 Money Market Funds remained unchanged at 10.0 percent from last week. The yield on the Cytonn Money Market increased marginally by 0.1 percentage points to come in at 10.9 percent, from 10.8 percent recorded the previous week.

READ: T-Bills Above The Table After Being In The Red For Weeks