The Central Bank of Kenya (CBK) took up Sh25 billion from investors in the 182 and 364-day Treasury bill sales this week, bringing the cumulative borrowing from the T-bill market this month to Sh72 billion.\
The government has been forced to take up more funds from the domestic market to cover for high debt maturities, which in February are expected to hit Sh108 billion.
The State is also in the market for an additional Sh30 billion through an infrastructure bond, which would help roll over some of the maturities.
The government was this week in the market for Sh12 billion in the sale of the two tenors of T-bills, with investors bidding heavily to the tune of Sh27.7 billion, which represented a 231 per cent performance rate on the offers.
“The total number of bids received was 378 amounting to Sh18.03 billion representing 300.4 per cent subscription and 118 bids amounting to Sh9.66 billion representing 161.06 per cent subscription for 182 and 364 days, respectively.
“Bids accepted amounted to Sh13.50 billion for 182-days and Sh9.48 billion for 364 days Treasury bills,” said CBK in a statement.
The preference for the six-month paper draws from the convergence of the rates on offer on the two papers.
The government accepted bids at a yield of 10.52 per cent on the six month paper, and 10.94 per cent for the one year, both unchanged week-on-week.
Whenever rates on the two tenors converge, investors have been opting for the shorter paper, with its rate more preferable on a risk weighted basis, especially by investors who are uncertain over the longer term interest rate direction.
Although the government’s appetite for domestic debt remains high, the CBK has managed to prevent the rates from shooting upwards by rejecting aggressive bids.
The regulator has in the past two months cancelled auctions — for a 364-day offer and the Sh30 billion Treasury bond issue in January — due to what governor Patrick Njoroge termed as bids carrying prices that were way outside the yield curve.
The heavy bidding seen in this week’s offer is also indicative of a liquid market in which investors have limited investment options.
Liquidity had tightened in January on the back of CBK mop-up as it sought to curtail shilling volatility, but has improved in the past two weeks mainly due to government payments to its agencies through commercial banks.