T-Bills In The Red For The Second Consecutive Week Hitting 47.1%

KEY POINTS
Specifically, for Treasury Bills, the yields on the 364-day, 182-day, and 91-day papers nudged higher to 13.1072% (+37.92bps), 12.5579% (16.59 bps), and 12.6855% (+33.35bps), w/w respectively. See below the performance of the yields on the government papers.
During the week, T-bills were undersubscribed for the second consecutive week with the overall subscription coming in at 47.1%, up from 38.1% recorded the previous week. The undersubscription was largely attributable to the tightened liquidity in the money market.
The Central Bank received KES 10.3 bn in bids and accepted 91.4% of the amount. Demand for the 91-day paper remained the highest, having recorded a subscription rate of 167.4%, down from 176.8%, despite the paper’s rate surpassing that of the 182-day paper.
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The subscription rate for the 182-day and 364-day papers came in at 43.5 and 2.6%, respectively, reflecting investors’ preference for short-term government securities.
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In the debt auction space, the government through the Central Bank is seeking to raise KES 40.0 bn via a fresh 2-year and 5 years reopened fixed coupon bond; FXD1/2023/2 and FXD1/2023/5.
The bonds coupon rate will be market determined for the new bond while that of the 5-year bond is 16.8%. The period of sale runs up to 16th August 2023.
“We expect an oversubscription on the bonds given the high yields and consequently, the coupon rates that offer attractive returns to investors. The tightened liquidity in the money market may however weigh on the performance of the August issue,” said analysts from Standard Investment Bank.
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The yield curve continues to deep within the medium-term securities, further deepening the inversion as yields on short-term securities continue to rise faster than yields on medium-term and long-term securities, reflecting short-term expectations of the country’s interest rate environment and the government’s heightened appetite for borrowing.
Specifically, for Treasury Bills, the yields on the 364-day, 182-day, and 91-day papers nudged higher to 13.1072% (+37.92bps), 12.5579% (16.59 bps), and 12.6855% (+33.35bps), w/w respectively. See below the performance of the yields on the government papers.
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Also, yields on all Eurobonds rose due to a deterioration in investor confidence following Moody’s comments on the government’s plans to buy back nearly half of the 2024 Eurobond – the rating agency stated that a buyback may constitute a default as investors are likely to lose some of the capital invested.
The comments were a surprise because the proposed buyback program does not contemplate a distressed exchange where bondholders will make a loss, but rather purchases from the market for investors voluntarily selling their instruments at a discount.
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