Investment

Demand For Treasury Bills Wane, CBK receives Bids Worth Ksh 13.66 Bn Against A Target Of Ksh 24.0 Bn

BY Standard Investment Bank · October 2, 2023 01:10 pm

During the week, there were significant outflows in the settlement of government securities and reverse repos which pushed the interbank rates higher, indicating a more lopsided distribution of liquidity.

The average interbank rate rose to 12.69%, from 12.17% while the average traded volumes fell 3.79% to KES 23.12bn from KES 24.03bn, a week earlier.

With expectations of tighter liquidity conditions, the Central Bank injected KES 89.22bn worth of liquidity through a double 7-day and a single 3-day reverse repo purchase at an average rate of 13.41%.

Meanwhile, demand for Treasury bills waned as the Central Bank received bids totaling KES 13.66bn against the projected weekly target of KES 24.0bn. The overall subscription came in at 56.91%, down from 84.07% the previous week.

80.6% of the bids were geared towards the 91-day paper which recorded a 275.19% subscription, down from 401.67% recorded in the previous week. The subscription rate for the 182-day and 364-day papers came in at 8.09 and 18.41%, respectively. KES 4.52bn was accepted, translating to an acceptance rate of 33.07%, the lowest in more than three years.

Bond turnover in the domestic secondary market jumped 232.90% during the week ending 28th September, supported by significant sell/buy-backs – with investors moving their Available-for-Sale portfolios to Held-to-Maturity (potentially to avoid Mark-to-market losses).

Meanwhile, the September tap sale was highly undersubscribed partly due to the tightened liquidity in the money market. Investors bid 3.45bn against the KES 15.0bn target offered with FXD1/2023/02 receiving most of the bids (76.35%).

In September, the general prices of goods and services rose by 6.8% y/y, extending four months of disinflation, an indication that prices have been rising at a slower pace. The performance was influenced by two main factors:

A higher base effect – inflation in September 2022, came in at 9.2%. The high starting point potentially sets the stage for lower percentage changes and may not fully reflect the actual changes in prices of goods and services.

A slowdown in the major indices of the inflation basket – major components of the consumer price index, experienced a deceleration in price increases except the transport index, which accelerated while the restaurant and accommodation index remained stable.