T-Bills Back To Oversubscription After 2 Weeks In The Cold

T-bills were oversubscribed during the week with the overall subscription rate coming in at 118.2 percent, an increase from the 29.3 percent recorded the previous week.

The oversubscription last week was attributable to the high liquidity in the money markets; the dramatic increase in subscription was due to the closure of the three bonds offered earlier in the month.

The 91-day paper recorded the highest subscription rate, receiving bids worth 12.1 billion shillings against the offered 4.0 billion shillings, translating to a subscription rate of 303.6 percent, a significant increase from the 70.3 percent recorded the previous week.

Investors’ continued interest in the 91-day paper during the week is mainly attributable to the paper’s higher return on a risk-adjusted basis.

The subscription rate for the 182-day paper increased to 152.3 percent from 31.3 percent recorded the previous week, while the subscription rate for the 364-day paper also declined to 10.0 percent, from 10.9 percent recorded the previous week.

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The yields on the 91-day and 364-day papers increased by 7.2 bps and 0.2 bps to 6.6 and 7.4 percent, respectively, while the yield on the 182-day paper declined marginally by 1.3 bps to 7.1 percent.

The government continued to take advantage of the low yields and the high liquidity in the market by accepting 100.0 percent of the 28.4 billion shillings worth of bids received. 

In the primary bonds auction, the government is seeking to raise 75.0 billion shillings for budgetary support by issuing a new infrastructure bond, IFB1/2021/21. The coupon will be market-determined with the offer period ending on 7th September 2021.

“We expect the bond to be oversubscribed, similar to the primary bond offer earlier this month, due to the prevailing high liquidity in the market and tax-free nature of the bond. We recommended bidding of the bond at 12.9 -13.2 percent,” said Cytonn Investments.

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