T-bills were oversubscribed, with the overall subscription rate coming in at 121.8 percent, up from the 97.1 percent recorded the previous week.
The oversubscription of the T-Bills was partly attributable to the eased liquidity in the money market with the average interbank rate declining to 5.1 percent from 5.2 percent recorded the previous week.
Investor’s preference for the shorter 91-day paper persisted as they sought to avoid duration risk, with the paper receiving bids worth 19.5 billion shillings against the offered 4.0 billion shillings, translating to a subscription rate of 487.7 percent, up from 416.3 percent recorded the previous week.
The subscription rates for the 364-day and the 182-day papers also increased to 29.9 and 67.2 percent from 21.5 and 44.9 percent recorded the previous week, respectively.
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 5.4 bps, 2.5 bps, and 2.9 bps to 10.3, 9.8, and 9.4 percent respectively.
The Government rejected expensive bids, accepting a total of 17.4 billion shillings worth of bids out of the 29.2 billion shillings worth of bids received, translating to an acceptance rate of 59.6 percent.
Key to note, for the 91-day paper, the government only accepted 7.7 billion shillings worth of bids out of the 19.5 billion shillings worth of bids received, which translated to a 39.5 percent acceptance rate.
In the Primary Bond Market, the government is seeking to raise an additional 20.0 billion shillings for funding infrastructure projects in the FY’2022/2023 by offering a tap sale of the recent December Switch bond, IFB1/2022/6.
The tap sale period ends on 22nd December 2022, or upon attainment of the 20.0 billion shillings quantum. The coupon rate and weighted average accepted yield of the bond is 13.2 percent.
“Although the initial switch bond received an undersubscription of 60.3 percent, we anticipate an oversubscription, given the tax-free nature of the bond, and that, it will now allow investors who weren’t eligible in the initial switch bond,” said Cytonnn in the latest report.
Additionally, the government re-opened two bonds, namely; FXD1/2020/05 and FXD1/2022/15, with effective tenors to maturity of 2.4 years and 14.3 years respectively, in a bid to raise 50.0 billion shillings for budgetary support.
The coupon rates for the bonds are 11.7 and 13.9 percent for FXD1/2020/5 and FXD1/2022/15, respectively.
“We expect the bonds to be undersubscribed, with FXD1/2020/5 receiving a higher subscription as investors avoid duration risk,” added Cytonn.
The bonds are currently trading in the secondary market at yields of 12.3 and 13.9 percent for FXD1/2020/5 and FXD1/2022/15, respectively.
“As such, the recommended bidding range for the two bonds is 12.4-12.8 percent for FXD1/2020/5 and 13.9-14.3 percent for FXD1/2022/15. The period of the sale for the bonds runs from 14th December 2022 to 10th January 2023.”
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