During the week, T-bills were undersubscribed, with the overall subscription rate coming in at 75.8 percent, a decline from the 117.9 percent recorded the previous week.
Investor’s preference for the shorter 91-day paper persisted, with the paper receiving bids worth 12.0 billion shillings against the offered 4.0 billion shillings, translating to a subscription rate of 299.8 percent, down from 488.0 percent recorded the previous week.
Similarly, the subscription rates for the 364-day and 182-day papers declined to 21.5 and 40.4 percent, from 39.7 and 48.2 percent respectively, 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 3.7 bps, 1.4 bps, and 2.7 bps to 10.0, 9.7, and 9.1 percent, respectively.
In the Primary Bond Market, the government is seeking to raise Kshs 60.0 bn for infrastructure projects by opening an infrastructure bond, IFB1/2022/14, with a tenor of 14 years whose offer period ends on 8th November 2022.
Key to note, the bond’s coupon rate will be market determined. Given the ample liquidity in the market, as well as the attractive tax-free nature of the infrastructure bond, we anticipate an oversubscription and a higher acceptance rate. Our recommended bidding range for the bond is 13.8-14.1 percent within which bonds of a similar tenor are trading.
During the week, liquidity in the money markets eased, with the average interbank rate declining to 5.0% from 5.1% recorded the previous week, partly attributable to government payments offsetting tax remittances. The average interbank volumes traded declined by 6.1% to Kshs 29.8 bn from Kshs 31.7 bn recorded the previous week.
During the week, the yields on Eurobonds were on a downward trajectory, an indication of declining risk concerns over the economy. The yield on the 10-year Eurobond issued in 2014 declined the most by 1.1% points to 16.2% from 17.3% recorded in the previous week.