A Day To Elections, T-Bills Fell Short Of 100% Again

By Soko Directory Team / Published August 8, 2022 | 9:00 am

KEY POINTS

The yields on the government papers recorded mixed performance, with the yields on the 182-day and 91-day papers increasing by 0.8 bps and 7.4 bps to 9.4% and 8.5%, respectively, while the yield on the 364-day paper declined by 2.6 bps to 9.9%.

KEY TAKEAWAYS

The bonds are currently trading in the secondary market at yields of 11.7%, 13.5%, and 13.9%, for FXD1/2022/03, FXD2/2019/10, and FXD1/2021/20, respectively.

During the week, T-bills remained undersubscribed, with the overall subscription rate coming in at 48.3%, down from the 82.1% recorded the previous week, partly attributable to the heightened perceived risks as the 2022 elections edge closer.

Investors’ preference for the shorter 91-day paper persisted, with the paper receiving bids worth Kshs 7.4 bn against the offered Kshs 4.0 bn, translating to a subscription rate of 186.9%, down from the 351.9% recorded the previous week.

The subscription rate for the 364-day and 182-day papers also declined to 20.5% and 20.6% from 23.8% and 32.5%, respectively, recorded the previous week.

The government continued to reject expensive bids, accepting a total of Kshs 11.4 bn worth of bids out of the Kshs 11.6 bn worth of bids received, translating to an acceptance rate of 98.6%.

In the Primary Bond Market, the government re-opened three bonds namely; FXD1/2022/03, FXD2/2019/10, and FXD1/2021/20 with compelling tenors of 2.7 years, 6.7 years, and 19.1 years respectively, in a bid to raise Kshs 50.0 bn for budgetary support.

The bond coupon rates are 11.8%, 12.3%, and 13.4% for FXD1/2022/03, FXD2/2019/10, and FXD1/2021/20, respectively.

“We expect the bonds to be undersubscribed as investors continue to attach higher risk premium on the country due to the increased perceived risks arising from increasing inflationary pressures, the upcoming elections, and local currency depreciation,” said Cytonn Investments.

The bonds are currently trading in the secondary market at yields of 11.7%, 13.5%, and 13.9%, for FXD1/2022/03, FXD2/2019/10, and FXD1/2021/20, respectively.

“As such, our recommended bidding ranges for the three bonds is 11.7%-12.2% for FXD1/2022/03, 13.5%-14.0% for FXD2/2019/10 and 13.9% -14.4% for FXD1/2021/20. The period of sale for the bonds runs from 29^th July to 16^th August 2022,” added Cytonn.

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