T-Bills Still Floating In The Red; Any Hope In The Near Future?

T-bills remained undersubscribed, with the overall subscription rate coming in at 60.4 percent, up from the 29.7 percent recorded last week.

The performance of the T-Bills was partly attributable to the tightened liquidity in the market, with the average interbank rate coming in at 4.8, from 4.6 percent recorded the previous week.

The 364-day paper recorded the highest subscription rate, receiving bids worth 8.2 billion shillings against the offered 10.0 billion shillings, translating to a subscription rate of 81.7 percent, an increase from the 24.7 percent recorded the previous week.

The higher preference for the 364-day paper is attributable to its higher yield of 9.7 percent compared to the 7.4 percent 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 increased to 59.6 and 39.3 percent, respectively, from 38.1 and 31.3 percent, recorded the previous week.

The yields on the government papers recorded mixed performance with yields on the 91-day and 182-day papers increasing by 7.5 bps and 5.5 bps, to 7.4 and 8.2 percent, respectively while the yield on the 364-day paper declined by 0.9 bps to 9.7 percent.

The government accepted bids worth 14.4 billion shillings, out of the 14.5 billion shillings worth of bids received, translating to an acceptance rate of 99.6 percent, reflecting the government’s debt appetite.

In the Primary Bond Market, the government released the auction results for the recently issued three-year treasury bond, FXD1/2022/03, which recorded an undersubscription of 85.1 percent, partly attributable to the tightened liquidity in the money markets.

The government sought to raise Kshs 40.0 bn for budgetary support, received bids worth Kshs 34.0 bn, and accepted bids worth 33.1 billion shillings, translating to a 97.3 percent acceptance rate.

The bond had a coupon rate and a market-weighted average rate of 11.8 percent. For the month of April, the Government had opened one other bond, namely; FXD1/2022/15, whose period of sale will end on 19^th April 2022 and we expect investors to prefer this longer-dated bond in search of higher yields on a risk-adjusted basis.

Bonds of a similar tenor to maturity are currently trading at yields in the range of 13.1-13.6 percent.

Read More: How Did The T-Bills Perform During The First Quatre Of 2022?