T-Bills In The Red, Investors Rush For Shorter 91-Day Papers

By Soko Directory Team / Published August 29, 2022 | 9:00 am

KEY POINTS

The subscription rate for the 182-day paper declined to 41.6 percent from 68.0 percent while that of the 364-day paper increased to 44.4 percent from 11.4 percent recorded the previous week.

KEY TAKEAWAYS

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 0.1 bps, 4.0 bps, and 9.8 bps to 9.9, 9.5, and 8.8 percent, respectively.

The government rejected expensive bids accepting only bids worth 15.0 billion shillings, out of the 19.4 billion shillings worth of bids received, translating to an acceptance rate of 77.3 percent.

During the week, T-bills remained undersubscribed, with the overall subscription rate coming in at 80.9 percent, down from the 82.1 percent recorded the previous week.

Investors’ preference for the shorter 91-day paper persisted, with the paper receiving bids worth 10.8 billion shillings against the offered 4.0 billion, translating to a subscription rate of 270.4 percent, down from the 294.3 percent recorded the previous week.

The subscription rate for the 182-day paper declined to 41.6 percent from 68.0 percent while that of the 364-day paper increased to 44.4 percent from 11.4 percent recorded the previous week.

The government rejected expensive bids accepting only bids worth 15.0 billion shillings, out of the 19.4 billion shillings worth of bids received, translating to an acceptance rate of 77.3 percent.

In the Primary Bond Market, the government re-opened two bonds namely; FXD1/2022/10 and FXD1/2022/15 with effective tenors of 9.6 years and 14.5 years respectively, in a bid to raise Kshs 50.0 bn for budgetary support.

The coupon rates for the bonds are 13.5 and 13.9 percent for FXD1/2022/10 and FXD1/2022/15, respectively.

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

The bonds are currently trading in the secondary market at yields of 13.6% and 13.9%, for FXD1/2022/10 and FXD1/2022/15, respectively.

“As such, our recommended bidding ranges for the two bonds are 13.6-14.1 percent for FXD1/2022/10 and 13.9 -14.4 percent for FXD1/2022/15. The period of sale for the bonds runs from 25^th August 2022 to 13^th September 2022,” added Cytonn.

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