91-Day Paper Demand Retains T-Bills Above 120%

By Soko Directory Team / Published January 23, 2023 | 12:21 pm

KEY POINTS

The subscription rate for the 182-day paper increased to 131.0 percent from 57.7 percent recorded the previous week, while that of the 364-day paper declined to 21.9 percent from 46.7 percent 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 3.8 bps, 3.2 bps, and 4.9 bps to 10.5, 9.9, and 9.5 percent respectively.

T-bills remained oversubscribed with the overall subscription rate coming in at 122.7 percent, up from 108.9 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 14.2 billion shillings against the offered 4.0 billion shillings, translating to a subscription rate of 354.3 percent, down from 392.3 percent recorded the previous week.

The Government accepted a total of 29.4 billion shillings worth of bids out of the 29.5 billion shillings worth of bids received, translating to an acceptance rate of 99.8 percent.

The graph below compares the overall T- bills subscription rates obtained in 2017, 2022, and 2023 Year to Date (YTD):

T-Bills

In the Primary Bond Market, the government is seeking to raise an additional Kshs 10.0 bn for budgetary support in the FY’2022/2023 by offering a tap sale for the recently reopened Fixed Coupon Treasury Bonds, FXD1/2020/005 and FXD1/2022/015 with effective tenors to maturity of 2.4 years and 14.3 years respectively.

The tap sale period closes on 20^th January 2023, or upon attainment of the Kshs 10.0 bn quantum. The weighted average yields for the two bonds are 12.9 percent and 14.2 percent for FXD1/2020/005 and FXD1/2022/015, respectively, while the coupon rates are 11.7 percent and 13.9 percent for FXD1/2020/005 and FXD1/2022/015, respectively.

Although the initial re-opening of the two bonds received an undersubscription of 83.3%, we anticipate an oversubscription on the tap sale, given the low amount offered on the tap sale at Kshs 10.0 bn and the low tenure to maturity presented by the FXD1/2020/005 at 2.4 years, a preference by investors as they seek to avoid duration risks.

About Soko Directory Team

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