T-bills were undersubscribed, with the overall subscription rate coming in at 36.5 percent, a decline from the 118.2% recorded the previous week.
The massive drop in T-Bill subscription was attributable to the tightened liquidity in the market as evidenced by the interbank rate increasing by 0.6 percentage points to 3.5 percent from 2.9 percent recorded the previous week.
The 364-day paper recorded the highest subscription rate, receiving bids worth 5.0 billion shillings against the offered 10.0 billion shillings, translating to a subscription rate of 49.6 percent, an increase from the 10.0 percent recorded the previous week.
The renewed interest in the 364-day paper is mainly attributable to investors’ hunt for higher yields.
The subscription rate for the 182-day and the 91-day papers declined to 20.2 and 44.2 percent, from 152.3 and 118.2 percent recorded the previous week, respectively.
The yields on the 91-day, 182-day, and 364-day papers increased by 14.2 bps, 9.1 bps, and 7.2 bps to 6.7, 7.2, and 7.6 percent respectively.
The government continued to reject expensive bids by accepting 7.8 billion shillings out of the 8.8 billion shillings of bids received, translating to an acceptance of 89.4 percent.
In the money markets, 3-month bank placements ended the week at 7.7 percent (based on what we have been offered by various banks), while the yield on the 91-day T-bill increased by 14.2 bps to 6.7 percent.
The average yield of the Top 5 Money Market Funds increased by 0.9 percentage points to 10.7 percent from 9.8 percent recorded the previous week.
The yield on the Cytonn Money Market Fund declined by 0.1 percentage points to 10.6 percent, from 10.7 percent recorded last week.
Rates in the fixed income market have remained relatively stable due to the high liquidity in the money markets, coupled with the discipline by the government as they reject expensive bids.
The government is 40.8 percent ahead its prorated borrowing target of 114.0 billion shillings having borrowed 160.5 billion shillings in FY’2021/2022.
“We expect a gradual economic recovery going into FY’2021/2022 as evidenced by KRA collecting 1.7 trillion shillings in FY’2020/2021, a 3.9 percent increase from 1.6 trillion shillings collected in the prior fiscal year,” said Cytonn Investments.
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