T-Bills Oversubscribed For The Second Week Running

Last week, T-bills remained oversubscribed, with the overall subscription rate coming in at 146.0 percent, an increase from the 130.6 percent recorded the previous week.

The 91-day paper recorded the highest subscription rate, receiving bids worth 11.3 billion shillings against the offered 4.0 billion shillings, translating to a subscription rate of 282.7 percent, an increase from the 252.0 percent recorded the previous week.

The oversubscription of the 91-day paper is attributable to the higher risk-adjusted return offered by the paper given the decline in the rates of the other papers.

The subscription rate for the 364-day paper declined to 43.2 percent, from 73.2 percent recorded the previous week, while the subscription rate for the 182-day paper increased to 194.1 percent, from 139.5 percent recorded the previous week.

The yields on all three papers declined; with the 91-day, 182-day, and 364-day paper declining by 11.4 bps, 12.7 bps, and 8.5 bps, to 6.6, 7.1, and 7.6 percent, respectively.

The government continued to reject expensive bids, accepting 27.3 billion shillings out of the 35.0 billion shillings worth of bids received, translating to an acceptance rate of 77.8 percent. 

In the primary bonds auction, the government reopened three previously issued bonds, FXD1/2012/15, FXD1/2018/15, and FXD1/2021/25 with effective tenors of 6.2 years, 11.9 years, and 24.9 years, respectively.

The period of the sale runs between 28th June 2021 and 13th July 2021. The bonds are currently trading at a yield of 11.5, 12.5, and 13.5 percent in the secondary market, respectively.

“We recommend the following bidding ranges; (i) FXD1/2012/15 – 11.4-11.8 percent, (ii) FXD1/2018/15 – 12.4-12.7 percent, and, (iii) 13.4%-13.8 percent,” said experts from Cytonn Investments.

We anticipate an oversubscription on the three bonds, due to ample liquidity in the money markets coupled with the fact that the yields on the short-term papers have been continually declining in the past weeks.

In the money markets, 3-month bank placements ended at 7.9 percent, while the 91-day T-bill declined by 11.4 bps to 6.6 percent from 6.7 percent, recorded the previous week.

The average yield of the Top 5 Money Market Funds remained unchanged at 9.8 percent, similar to what was recorded the previous week, while the yield on the Cytonn Money Market (CMMF) increased by 0.1 percentage points to 10.2 percent from 10.1 percent, recorded the previous week.

Read More: T-Bills Still Having A Field Day 3 Weeks Running