T-Bill Subscription Slightly Dips To 102.1% From 122.1%

T-bills remained oversubscribed, albeit at a lower level than the previous week, with the overall subscription rate coming in at 102.1 percent, down from the 122.1 percent recorded the previous week.

The oversubscription was partly attributable to the eased liquidity in the money market, with the average interbank rate coming in at 5.3 percent from 5.5 percent recorded the previous week.

The 364-day paper recorded the highest subscription rate, receiving bids worth 13.4 billion shillings against the offered 10.0 billion shillings, translating to a subscription rate of 133.9 percent, an increase from the 68.7 percent recorded the previous week.

The performance is partly attributable to investors’ preference for the longer-dated paper, which offers a higher yield of 9.8 percent compared to the 8.0 and 7.2 percent yields offered by the 182-day and 91-day papers, respectively.

The subscription rate for the 182-day paper and 91-day paper declined to 58.1 and 132.4 percent, from 126.0 and 246.0 percent, respectively.

The yields on the government papers were on a downward trajectory, with the yields on the 364-day, 182-day, and the 91-day papers declining by 0.3 bps, 3.1 bps, and 5.9 bps to 9.8, 8.0, and 7.2 percent respectively.

The government continued rejecting expensive bids, accepting bids worth 23.1 billion shillings out of the 24.5 billion shillings worth of bids received, translating to an acceptance rate of 94.3 percent.

The Primary Bond Market

The government released the auction results for the recently re-opened bonds namely; FXD1/2021/05, FXD1/2020/15, and FXD1/2021/25.

The three bonds recorded an undersubscription, with the subscription rate coming in at 81.9 percent, partly attributable to the tightened liquidity in the money markets during the bonds’ sale period, with the interbank rate averaging 5.6 percent, in comparison to an average rate of 4.7 percent in February 2022.

The government sought to raise 50.0 billion shillings for budgetary support, received bids worth 40.9 billion shillings, and accepted bids worth 18.5 billion shillings translating to a 45.1 percent acceptance rate.

The low acceptance rate for the bonds can be attributed to investors demanding a higher premium to compensate for duration risks and expected inflationary pressures following the continued rise in global fuel prices.

Investors preferred the longer-tenure issue; FXD1/2021/25 which received bids worth 22.6 billion shillings representing 55.2 percent of the total bids received due to its higher returns of 14.0 percent compared to the 13.7 percent and 12.0 percent returns offered by FXD1/2020/15 and FXD1/2021/25, respectively.

The coupons for the three bonds were 11.3, 12.8, and 13.9 percent, and the weighted average yield for the issues was 12.0, 13.7, and 14.0 percent, for FXD1/2021/05, FXD1/2020/15, and FXD1/2021/25, respectively.

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