T-Bill Subscription Still In The Woods As Christmas Approaches

T-Bill Subscription

T-Bills have continued with an under-subscription trend even as the year snails to the end according to the stats compiled by Cytonn Investments in their latest weekly report.

Last week, T-bills remained undersubscribed, with the subscription rate coming in at 53.5 percent down from 55.3 percent the previous week.

The continuous undersubscription of the T-Bills has been attributed to reduced participation by banks who are now looking to lend to the private sector following the repeal of the rate cap legislation.

The yield on the 91-day and 364-day paper remained unchanged at 7.2 and 9.8 percent respectively, while that of the 182-day paper declined by 0.1 percentage points to 8.1 percent from 8.2 percent recorded last week.

The acceptance rate increased to 99.2 percent from 44.7 percent recorded the previous week, with the government accepting 12.7 billion shillings of the 12.8 billion shillings worth of bids received.

Only a month after the repeal of the Interest Rate cap (7^th Nov), the overall subscription rate has declined to lows of 34.8 percent, which is 83.3 percentage points lower than the YTD average of 118.1 percent.

“We attribute this to reduced demand for government paper from the banking sector following the repeal of the interest rate cap,” said Cytonn.

READ: T-Bills Subscription Hits Their Lowest In Months During The Week

The 5-Year Bond

For the month of December, the National Treasury issued a 5-year bond of 25.0 billion shillings (FXD 3/2019/5) with a coupon rate of 11.5 percent. The bond was oversubscribed, with the subscription rate coming in at 113.9 percent.

The continued high demand for short tenor bonds has been attributable to the negative bias by investors on longer-tenor bonds due to the relatively flat yield curve on the long-end brought about by the saturation of long-term bonds, coupled with the duration risk associated with long-term papers, thus making the short tenor bonds more attractive.

The bond yield for the issue came in at 11.6 percent while the acceptance rate on the bond was 65.8 percent with the government accepting 18.7 billion shillings of the 28.5 billion shillings worth of bids received.

The Money Markets

In the money markets, 3-month bank placements ended the week at 8.4 percent (based on what we have been offered by various banks)

The 91-day T-bill came in at 7.2 percent while the average of Top 5 Money Market Funds came in at 10.0 percent from 9.9 percent recorded the previous week.

The Cytonn Money Market Fund, increased by 0.2 percentage points to close the week at 10.9 percent from 10.7 percent recorded in the previous week.