T-Bill Subscription Clocks 80.8% But Still Swimming In The Red

During the week, T-bills remained undersubscribed but the overall subscription rate increased to 80.8 percent, from 61.3 percent recorded the previous week.

The undersubscription was partly attributable to the tightened liquidity in the money market with the average interbank rates rising to 5.1 percent, from the 4.8 percent recorded the previous week.

The highest subscription rate was in the 364-day paper which increased to 90.0 percent, from 74.6 percent recorded the previous week attributable to high demand for long-term government papers by investors.

The subscription for the 182-day paper also increased to 73.2 percent, from 40.0 percent recorded the previous week, while the 91-day paper decreased to 76.8 percent from 81.1 percent recorded the previous week.

The yields on the 364-day government paper increased by 0.9 bps to 10.0%, while the yields on 182-day and 91-day increased by 5.9 bps each to 9.1 and 7.9 percent, respectively partly attributable to investors attaching a higher risk premium on the country due to perceived higher risks arising from increasing inflationary pressures and local currency depreciation.

The government continued to reject expensive bids, accepting a total of 18.2 billion shillings worth of bids out of 19.4 billion shillings received, translating to an acceptance rate of 94.0 percent.

In the Primary Bond Market, the Central Bank of Kenya re-opened two bonds issued in April 2022 on tap sale; FXD1/2022/03 and FXD1/2022/15, with tenors to maturity of 3.0 years and 15.0 years, coupons of 11.8 and 13.9 percent respectively.

The tap sale seeks to raise 25.0 billion shillings for budgetary support, with the initial offers having attempted to raise 40.0 billion shillings and 30.0 billion shillings respectively.

The initial offers recorded a mixed performance with the FXD1/2022/03 having been undersubscribed at 85.1 percent, while FXD1/2022/15 was oversubscribed at 108.5 percent.

Out of the initial 70.0 billion shillings target amount, the government raised an aggregate of 60.7 billion shillings from the two bonds.

The bonds are currently trading in the secondary market at a rate of 11.9 percent for FXD1/2022/03 and 14.0 percent for FXD1/2022/15. The period of sale runs from Tuesday, 14^th June 2022 to Thursday, 23^rd June 2022 or upon attainment of quantum, whichever comes first.

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