T-Bills Still In The Red As Money Markets Bloom

T-bills remained undersubscribed during the week, but the overall subscription rate improved to 84.8 percent from 29.9 percent recorded last week.

The slight improvement in the T-Bills as compared to the previous week was due to improved liquidity in the money market as a result of government payments and net redemption of government securities.

Investors’ continued interest in the 364-day paper saw it record the highest subscription rate at 146.3 percent, an increase from 44.1 percent, as the paper has an attractive rate of 9.4 percent, which is higher than the rate for most banks placements.

The subscription rate for the 91-day declined to 25.6 percent, from 50.5 percent, while that of the 182-day paper increased to 79.0 percent, from 7.6 percent recorded the previous week.

The yields on the 364-day, 182-day, and 91-day papers rose by 1.1 bps, 0.4 bps, and 5.8 bps to 9.4, 7.9, and 7.1 percent respectively.

The increase in the yields since the start of the year can be attributable to investors’ demand for a higher return as the government is desperate to get funds and the increased level of risk that the economy faces due to the impact of COVID-19.

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The government continued to reject expensive bids by accepting 20.1 billion shillings of the 20.3 billion shillings bids received, translating to an acceptance rate of 98.9 percent.

There was an oversubscription for the IFB1/2021/018 infrastructure bond, with the overall subscription rate coming in at 147.6 percent.

The Infrastructure bond remains attractive due to its tax-free status and the higher yield due to its duration.  The bond has a tenor of 18.0 years and a coupon rate of 12.7 percent.

The government was looking to raise 60.0 billion shillings; it received bids worth 88.6 billion shillings, and accepted only 81.9 billion shillings, translating to an acceptance rate of 92.5 percent. The weighted average rate of accepted bids for the bond came in at 12.7 percent.

In the money markets, 3-month bank placements closed the week at 7.5 percent an increase from 7.2 percent recorded the previous week.

The 91-day T-bill remained relatively unchanged at 7.1 percent during the week, while the average of Top 5 Money Market Funds declined to 10.0 percent from 10.2 percent recorded the previous week.

The yield on the Cytonn Money Market fund declined to 10.5 percent from 10.7 percent recorded the previous week.