T-Bills Back Into The Light After Weeks In The Dark

T-bills were oversubscribed for the first time in two weeks, with the overall subscription rate coming in at 134.8 percent, up from an undersubscription of 34.4 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 25.7 billion shillings against the offered 4.0 billion shillings, translating to an oversubscription rate of 643.3 percent, significantly higher than the 72.6 percent recorded the previous week.

Notably, the 182-day and 364-day papers recorded continued under subscriptions of 5.8 and 60.3 percent from undersubscription rates of 35.5 and 18.1 percent, respectively, recorded the previous week.

The government accepted bids worth 32.2 billion shillings out of the total 32.3 billion shillings bids received, translating to an acceptance rate of 99.8 percent.

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The yields on the government papers recorded mixed performances, with the yields on the 364-day paper and 91-day papers increasing by 5.7 bps and 9.7 bps to 10.9 and 10.0 percent, respectively while the yield of the 182-day paper declined by 3.1 bps to 10.4 percent.

In the primary market, the Central Bank of Kenya released the bond auction results for the re-opened treasury bond FXD2/2018/10 with an effective tenor to maturity of 5.7 years.

In line with our expectations, the bond was undersubscribed, receiving a bid worth 3.6 billion shillings, against the offered 20.0 billion shillings, translating to an undersubscription rate of 17.9 percent, on the back of tightened liquidity in the money market, with the average interbank rate increasing by 50.0 bps to 8.1 percent, from 7.6 percent recorded the previous week.

The government continued to reject expensive bids, accepting bids worth 3.4 billion shillings out of the 3.6 billion shillings of total bids received, translating to an acceptance rate of 94.1 percent. The accepted weighted average yield for the bond came in at 14.4 percent, while the coupon rate was 12.5 percent.

Related Content: 10-Year Treasury Bond Undersubscribed As Investors Lose Trust