Investment

364-Day T-Bills Outperformed Other Asset Classes In 2022

BY Cytonn Investments · January 4, 2023 01:01 pm

KEY POINTS

During the period under review, the Cytonn Money Market Fund (CMMF) had the highest effective annual yield of 10.6% compared to an industry average of 9.2%.

Notably, the equities asset class recorded a decline in performance from 2021 with NASI declining by 29.2% points to close at a loss of 23.7%, from a return of 5.5% in 2021.

KEY TAKEAWAYS

Money Market Funds continued to register high returns coming second after the 364-Day T-bill with average yields of 9.8% in 2022.

Money Market Funds offer a good safe haven for investors who wish to switch from a higher-risk portfolio to a low-risk portfolio, especially in times of uncertainty.

The returns by the various asset classes improved in 2022, with the average of the top five money market funds (MMFs), Real Estate yield, and government papers being on upward trajectories.

The average of the top 5 MMF recorded a yield of 9.8%, 0.3% points increase from 9.5% recorded in 2021 as the average yield of the Real Estate also increased by 0.3% points to 6.8% in 2022, from 6.5% recorded in 2021.

Similarly, with the upward readjustment of the yield curve, the shorter-dated Government papers recorded an increase of 0.5% points for 364-day while the 182-day and 91-day papers recorded increases of 0.9% points each to 9.9%, 9.0%, and 8.2%, for the 364-day, 182-day, and 91-day papers, respectively.

Money Market Funds continued to register high returns coming second after the 364-Day T-bill with average yields of 9.8 percent in 2022.

Money Market Funds offer a good safe haven for investors who wish to switch from a higher-risk portfolio to a low-risk portfolio, especially in times of uncertainty.

Related Content: T-Bills Dip Deep As The Year Fades, Clocks 69.9%

During the period under review, the Cytonn Money Market Fund (CMMF) had the highest effective annual yield of 10.6% compared to an industry average of 9.2%.

Notably, the equities asset class recorded a decline in performance from 2021 with NASI declining by 29.2 percentage points to close at a loss of 23.7 percent, from a return of 5.5 percent in 2021.

The decline in equities return can be attributable to the uncertainties surrounding the electioneering period, coupled with interest rate hikes in developed countries such as the United States resulting in huge capital outflows from the Kenyan market, as investors sought to profit from the high-interest rates abroad. Additionally, the high inflation rates experienced throughout the year resulted in negative investor sentiments contributing to the low performance.

In 2022, there was a marginal increase in demand for Treasury bills as the average subscription rate came in at 94.9%, up from the 91.9% subscription rate recorded in 2021.

The increased subscription rate was partly supported by investors’ preference for the shorter-dated government papers in a bid to hedge over-duration risks.

On the other hand, primary Treasury-bond subscriptions averaged 98.8%, which was lower than the 147.6% average subscription rate recorded in 2021.

Key to note, both the Treasury bills and bonds auctions were undersubscribed on the back of tightened liquidity in the money market with the average interbank rate increasing to 4.9% in 2022 from 4.7% in 2021 and perceived risks arising from the August 2022 General Elections.

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