T-bills Fully Subscribed During The Week, Interbank Market Narrows

During the week, liquidity gaps in the interbank market narrowed slightly, with the average lending rate dropping to 12.88% from 12.92% in the previous week. On the other hand, the average traded volumes rose marginally to KES 14.65bn, down from KES 14.59bn in the previous week, as the number of interbank deals dropped to 31, from 35.
The Open Market Operations remained active, with the Central Bank injecting a total of KES 133.69bn, undershooting the target KES 140bn. The offers were settled at an average rate of 13.17%, down from last week’s level of 13.66%.
The T-bill auction for the week was fully subscribed with the overall performance increasing to 100.8%, from 79.9%, the previous week. Investors bid KES 24.20bn against an offered amount of KES 24bn. The 91-day paper received 72.3% of the bids but 96.9% of the amount was accepted.
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Ultimately, KES 23.64bn was accepted at 15.78% (-0.96 bps), 16.63% (-3.59 bps), and 16.84% (-1.71 bps), for the 91-day, 182-day, and 364-day papers, respectively. Notably, the 91-day paper experienced the smallest decline in yields, even though it had the highest number of non-competitive accepted bids.
In the primary bond market, the fiscal agent successfully raised KES 32.02bn through a tap sale on IFB1/2023/17, one of the August bonds. Unlike the earlier reopening, the tap-sale saw a subscription rate of 234.6%, more than double the offer. Combined with the reopening, the total amount raised stands at KES 46.56bn, bringing the cumulative outstanding amount to KES 114.75bn. The bond continues to trade at a discount, potentially offering pockets of value to long-term investors.
The government is significantly ahead of its borrowing curve having borrowed KES 179.61bn (Inclusive of T-Bills), well above the prorated target of KES 78.54bn for FY24/25.
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