T-Bills Slightly Drop But Still Above Waters

T-bills remained oversubscribed last week albeit at a lower rate, with the overall subscription rate declining to 170.8 percent from the 204.5 percent recorded the previous week.

The lower subscription is partly attributable to tightened liquidity in the money market with the average interbank rate increasing to 4.4 percent from 4.2 percent recorded the previous week.

Investor’s preference for the shorter 91-day paper persisted, with the paper receiving bids worth 16.3 billion shillings against the offered 4.0 billion shillings, translating to a subscription rate of 406.3 percent down from 662.8 percent recorded the previous week.

The subscription rates for the 364-day and 182-day papers increased to 89.5 and 158.0 percent from 86.8 and 138.9 percent, respectively recorded the previous week.

The yields on the government papers recorded mixed performance, with the yields on the 182-day and 91-day papers increasing by 1.5 and 1.8 bps to 9.7 and 9.2 percent respectively, while the yield on the 364-day paper declined by 0.5 bps to 10.2 percent.

In the Primary Bond Market, the government is seeking to raise an additional 5.0 billion shillings for infrastructure projects by offering a tap sale of the recent November infrastructure bond, IFB1/2022/14.

The tap sale period ends on 22nd November 2022 or upon attainment of the 5.0 billion shillings quantum. Key to note, the tap sale coupon rate is pegged at 13.9 percent, the highest yield in the bonds market.

Given the attractive tax-free nature of the infrastructure bond, high-interest rates, and the initial bond oversubscription at 153.1 percent, we anticipate an oversubscription for the tap sale.

At the same time, during the week, liquidity in the money markets tightened, with the average interbank rate increasing to 4.4 percent from 4.2 percent recorded the previous week, partly attributable to tax remittances offsetting government payments.

The average interbank volumes traded increased by 81.7 percent to 21.1 billion shillings from 11.6 billion shillings recorded the previous week.

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