T-Bills Oversubscribed, Njaanuary Comes To An End

By Soko Directory Team / Published January 31, 2022 | 8:52 am

KEY POINTS

The yields on the government papers were on an upward trajectory, with the yields on the 91-day, 182-day, and 364-day papers increasing by 1.2 bps, 4.3 bps, and 3.4 bps to 7.3, 8.1, and 9.5 percent.

KEY TAKEAWAYS

For the month of February, the government is seeking to raise 75.0 billion shillings to fund infrastructure projects by issuing a new infrastructure bond, IFB1/2022/19, with a tenor of 19 years, whose period of sale runs from 31st January 2022 to 15th February 2022.

T-bills remained oversubscribed during the last week of January, albeit lower than the previous week, with the overall subscription rate coming in at 107.9 percent, from 119.5 percent recorded the previous week.

The 364-day paper recorded the highest subscription rate, receiving bids worth 19.1 billion shillings against the offered 10.0 billion shillings, translating to a subscription rate of 190.5 percent, an increase from the 144.3 percent, recorded the previous week.

The increase in subscription rate is attributable to investors’ preference for the longer-dated paper which offers higher yields of 9.5 percent compared to the 7.3 and 8.1 percent yields offered by the 91-day and 182-day papers, respectively.

The subscription rate for the 91-day and 182-day papers declined to 37.7 and 53.4 percent, from 48.1 and 123.1 percent, respectively, recorded the previous week, partly attributable to tightened liquidity in the money market.

The yields on the government papers were on an upward trajectory, with the yields on the 91-day, 182-day, and 364-day papers increasing by 1.2 bps, 4.3 bps, and 3.4 bps to 7.3, 8.1, and 9.5 percent, respectively.

The government continued to reject expensive bids, accepting bids worth 24.5 billion shillings out of the 25.9 billion shillings worth of bids received, translating to an acceptance rate of 94.5 percent.

Key to note, the bond’s coupon rate will be market-determined. Given the ample liquidity in the market evidenced by January’s average interbank rate declining to 4.5, from 5.1 percent recorded in December, as well as the attractive tax-free nature of the infrastructure bond, we anticipate an oversubscription and a higher acceptance rate.

Our recommended bidding range for the bond is 12.4%-12.5% within which bonds of a similar tenor are trading.

About Soko Directory Team

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