T-Bills Were In The Red For April But May Presents Hope

During the month of April, T-bill auctions recorded an undersubscription, with the overall subscription rate coming in at 89.1 percent, down from 111.5 percent recorded in March.

The 364-day paper despite having the most demand saw a decline in its subscription rate to 90.1 percent, a decrease from 157.2 percent recorded the previous month.

The subscription rate for the 91-day and 182-day papers declined to 54.6 and 20.6 percent, respectively, from 100.6 and 60.1 percent recorded in March.

The yields on the 364-day, 182-day, and 91-day papers rose by 21.5 bps, 9.9 bps, and 5.2 bps to 9.5, 8.0, and 7.1 percent, respectively.

Consequently, the government accepted a total of 72.1 billion shillings, out of the 85.6 billion shillings worth of bids received as they sought to contain rates.

T-Bills Last Week

During the week, T-bills were oversubscribed, with the overall subscription rate coming in at 125.0 percent, up from 59.8 percent recorded the previous week.

Investors continued their preference for the 364-day paper which recorded the highest subscription rate at 245.4 percent, an increase from 86.9 percent recorded the previous week, as the paper has an attractive rate of 9.5 percent, which is higher than the rate for most bank placements.

The subscription for the 182-day increased to 37.5 percent from 20.1 percent recorded the previous week, while the subscription for the 91-day paper declined to 42.7 percent from 91.5 percent recorded the previous week.

The yields on 364-day, 182-day, and 91-day papers rose by 1.4 bps, 6.4 bps, and 2.4 bps, respectively, to 9.5, 8.0, and 7.1 percent.

The government continued rejecting expensive bids by accepting 67.8 percent of the bids received, amounting to 20.3 billion shillings, out of the 30.0 billion shillings worth of bids received.

Read More:

• T-Bill Subscription For 364-Day Paper Hits 115.9% In January
• T-Bills Decline Further On Account Of Tightening Liquidity
• November Favors T-Bills As Overall Subscription Comes In At 102.5%

Primary Bonds

During the month, the Primary Bond Market recorded an oversubscription with the IFB1/2021/018 infrastructure bond, having an overall subscription rate of 147.6 percent.

The increased appetite for the bond was mainly due to its tax-free status and its attractive yield as the bond had a weighted yield of 12.7 percent compared to a Yield to Maturity of 13.2 percent, on a normal bond with the assumption of a 10.0 percent withholding tax for a bond with the same effective tenor.

The bond had a tenor of 18.0 years and a coupon rate of 12.7 percent. The government was looking to raise 60.0 billion shillings, they received bids worth 88.6 billion shillings, and accepted only 81.9 billion shillings, translating to an acceptance rate of 92.5 percent.

The Central Bank of Kenya also re-opened a previously issued bond, FXD2/2019/15 with an effective tenor of 13.0 years.

The government has also opened bidding for two more bonds FXD2/2019/15 and FXD1/2021/25 with tenors of 13 years and 25 years respectively whose offer period ends on 4^th May 2020.

“The coupon on the rate on the 15 years is 12.8% while that of the 25 years is market-determined. We recommended bidding of the two bonds at 13.0%-13.1% and 13.8%-13.9% for each bond respectively,” said Cytonn Investments.