T-Bills Still Undersubscribed Second Week Running

T-bills remained undersubscribed, with the overall subscription rate coming in at 72.6 percent, down from the 99.5 percent recorded the previous week.

The continued undersubscription of T-bills can be attributed to the fact that investors are shifting to the bond market in search of higher yields.

The 91-day paper recorded the highest subscription rate, receiving bids worth 6.9 billion shillings against the offered 4.0 billion shillings, translating to a subscription rate of 172.5 percent, an increase from the 100.8 percent recorded the previous week.

The subscription rate for the 182-day and the 364-day papers declined to 77.0 and 28.3 percent, from 99.5 and 98.9 percent recorded the previous week, respectively.

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

The yields on the 91-day, 182-day, and 364-day papers increased by 0.7 bps, 2.7 bps, and 26.0 bps to 6.8, 7.3, and 7.8 percent. The government accepted all the 17.4 billion shillings worth of bids received, translating to an acceptance rate of 100.0 percent.

In the Primary Bond Market, the 21-year infrastructure bond, IFB1/2021/021, recorded an oversubscription of 201.7 percent.

The government sought to raise 75.0 billion shillings for funding of infrastructure projects in the FY’2021/22 budget estimates, received bids worth 151.3 billion shillings, and accepted bids worth 106.8 billion shillings, translating to an acceptance rate of 70.6 percent.

The high subscription rate is mainly attributable to the tax-free incentive for infrastructure bonds which translates to a higher return. The coupon for the bond was market-weighted which is to be the weighted average yield rate of the issue and it came in at 12.7 percent.

Read More: T-Bills Snail Through August With An Undersubscription

During the week, liquidity in the money markets tightened, with the average interbank rate increasing by 0.3 percent points to 3.6 from 3.3 percent recorded the previous week, attributable to tax remittances that offset government payments made during the week.

The average interbank volumes increased by 21.8 percent to 13.7 billion from 11.2 billion shillings recorded the previous week.