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T-Bills’ Neck Above The Waters, But For How Long?

BY Soko Directory Team · July 18, 2022 08:07 am

KEY POINTS

The government accepted a total of 25.3 billion shillings worth of bids out of the 25.4 billion shillings worth of bids received, translating to an acceptance rate of 99.8 percent.

KEY TAKEAWAYS

The government is 34.5 percent behind its prorated borrowing target of Kshs 24.0 bn having borrowed 15.7 billion shillings of the 581.7 billion shillings borrowing target for the FY’2022/2023.

During the week, T-bills remained oversubscribed, with the overall subscription rate coming in at 105.8 percent, a slight increase from the 102.5 percent recorded the previous week.

The increase in the subscription rate was partly attributable to investors’ preference for the shorter-dated papers as they sought to avoid duration risk coupled with ample liquidity in the money market with the average interbank rates declining to 5.6 from 5.8 percent recorded the previous week.

Investors’ preference for the shorter 91-day paper persisted, with the paper receiving bids worth 13.2 billion shillings against the offered 4.0 billion shillings, translating to a subscription rate of 329.8 percent, a significant increase from the 276.0 percent recorded the previous week.

The subscription rate for the 364-day paper also increased to 71.1 percent from 51.2 percent while that of the 182-day paper declined to 50.9 percent from 84.3 percent recorded the previous week.

The yields on the government papers were on an upward trajectory, with the yields on the 364-day, 182-day, and 91-day papers increasing by 0.6 bps, 5.2 bps, and 8.1 bps to 10.0, 9.3, and 8.2 percent, respectively.

The government accepted a total of 25.3 billion shillings worth of bids out of the 25.4 billion shillings worth of bids received, translating to an acceptance rate of 99.8 percent.

Related Content: T-Bills Jump From 37% To 102.5% During The Week

At the same time, rates in the Fixed Income market have remained relatively stable due to the relatively ample liquidity in the money market.

The government is 34.5 percent behind its prorated borrowing target of Kshs 24.0 bn having borrowed 15.7 billion shillings of the 581.7 billion shillings borrowing target for the FY’2022/2023.

“We expect sustained gradual economic recovery as evidenced by the revenue collections of 2.0 trillion shillings during the FY’2021/2022, which was equivalent to 102.8% of the prorated revenue collection target,” said Cytonn Investments.

Additionally, despite the projected high budget deficit of 8.1% and the affirmation of the `B+’ rating with a negative outlook by Fitch Ratings, analysts believe that the support from the IMF and World Bank will mean that the interest rate environment will remain stable since the government is not desperate for cash.

“Owing to this, our view is that investors should be biased towards short-term fixed-income securities to reduce duration risk,” added Cytonn.

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system. Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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