T-Bills Drop Further To 55.8% Due To Investors’ Preference Of Longer-Dated Papers

T-bills were undersubscribed, with the overall subscription rate coming in at 55.8 percent, down from the 82.8 percent recorded the previous week.

The 364-day paper recorded the highest subscription rate, receiving bids worth 7.2 billion shillings against the offered 10.0 billion shillings, translating to a subscription rate of 72.2 percent, a decline from the 96.6 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 8.1 and 7.3 percent yields offered by the 182-day and 91-day papers, respectively.

The subscription rate for the 91-day paper increased to 58.0 percent, from 49.5 percent recorded the previous week while that of the 182-day paper declined to 38.4 percent, from 82.4 percent recorded the previous week.

The yields on the government papers were on an upward trajectory with yields on the 364-day, 182-day, and 91-day papers increasing by 0.4 bps, 4.1 bps, and 3.1 bps, to 9.8, 8.1, and 7.3 percent, respectively.

The government continued rejecting expensive bids, accepting bids worth 13.2 billion shillings out of the 13.4 billion shillings worth of bids received, translating to an acceptance rate of 99.0 percent.

For the month of April, the government has issued two new bonds, FXD1/2022/03 and FXD1/2022/015 with tenors of 3.0 years and 15.0 years respectively, in a bid to raise 70.0 billion shillings for budgetary support.

The period of sale for FXD1/2022/03 runs from 24^th March to 5^th April, while that of FXD1/2022/15 runs from 24^th March 2022 to 19^th April 2022. Key to note, the bonds coupon rates will be market-determined.

“We expect investors to prefer the longer-dated paper, FXD1/2022/15, in search of higher yields. Our recommended bidding range for the two bonds is 10.4-10.8 percent for FXD1/2022/03 and 13.6 – 13.8 percent for FXD1/2022/15 within which bonds of a similar tenors are trading,” said Cytonn Investments.

During the week, liquidity in the money markets remained ample, with the average interbank rate remaining relatively unchanged at 4.3 percent, as recorded the previous week, partly attributable to government payments that offset tax remittances.

The average interbank volumes traded declined by 36.9 percent to 10.9 billion shillings, from 17.2 billion shillings recorded the previous week.

Read More: 364-Day Paper Shines Despite T-Bills Dipping