As Kenyans Celebrated Christmas, T-Bills Were Swimming In The Red

T-bills remained undersubscribed last week with the overall subscription rate coming in at 26.6 percent down from 87.4 percent recorded the previous week.

The undersubscription was partly attributable to the tightened liquidity in the money market due to tax remittances, with the average interbank rate increasing to 5.5 percent, from 4.5 percent recorded the previous week.

The 364-day paper recorded the highest subscription rate, receiving bids worth 3.9 billion shillings against the offered 10.0 billion shillings translating to a subscription rate of 40.0 percent, a decline from the 52.3 percent recorded the previous week.

The subscription rate for the 91-day and 182-day papers decreased to 39.8 and 8.0 percent, from 113.3 and 112.2 percent, respectively.

The yields on the 182-day and 364-day papers increased by 0.5 bps and 10.1 bps to 8.0 and 9.3 percent, respectively, while the yield on the 91-day paper declined marginally by 0.1 bps to 7.3 percent.

The government accepted all the 6.4 billion shillings worth of bids received, translating to an acceptance rate of 100.0 percent.

In the Primary Bond Market, the government reopened three bonds, FXD1/2020/5, FXD2/2018/10, and FXD1/2021/20, with effective tenors of 3.4 years, 7.0 years, and 19.7 years, respectively, in a bid to raise 30.0 billion shillings for budgetary support.

The period of sale for the issue runs from 20^th December 2021 to 4^th January 2022 for FXD1/2020/5, while the period of sale for FXD2/2018/10 and FXD1/2021/20 runs from 20^th December 2021 to 18^th January 2022.

The coupon rates are 11.7, 12.5, and 13.4 percent for FXD1/2020/5, FXD2/2018/10, and FXD1/2021/20, respectively.

“We expect investors to prefer the longer-dated paper, FXD1/2021/20, as they search for higher yields. The bonds are currently trading in the secondary market at yields of 10.8, 12.2, and 13.3 percent, for FXD1/2020/5, FXD2/2018/10, and FXD1/2021/20, respectively,” said Cytonn Investments.

Cytonn Investments added, “and as such, our recommended bidding range for the three bonds is 10.6-11.0 percent for FXD1/2020/5, 12.0-12.4 percent for FXD2/2018/10, and 13.1-13.5 percent for FXD1/2021/20 within which bonds of a similar tenor are trading at.”