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Tight liquidity triggers low Treasury bill uptake

The Central Bank of Kenya (CBK) building in Nairobi. FILE PHOTO | NMG
The Central Bank of Kenya (CBK) building in Nairobi. FILE PHOTO | NMG 

Tight liquidity haunted the money markets in a short trading week featuring two public holidays, with the Treasury bills undersubscribed for the seventh week in a row.

During last week’s auction held last Friday, the overall subscription rate came in at 34.17 per cent compared to 46.7 per cent the previous week.

“There was tight liquidity in the money market. The tight liquidity was due to heavy transfer of taxes from banks and reverse repo maturities that came in at Sh29 billion and Sh17.4 billion respectively,” said Cytonn Investments analysts.

The Central Bank of Kenya (CBK) weekly report showed net borrowing by the government resulted in liquidity withdrawal of Sh5.3 billion.

The CBK further said the government payments of Sh30.1 billion had a marginal contribution to liquidity as it was largely offset by Value Added Tax (VAT) remittances of Sh29 billion through banks.

The liquidity conditions were, however, supported by CBK reverse repo purchase.

Subscription rates for the 91-, 182-, and 364-day papers came in at 12.65 per cent, 13.68 per cent and 63.27 per cent compared to 41.8 per cent, 45.9 per cent and 49.5 per cent, respectively, the previous week.

The three-month paper received bids worth Sh506.14 million against a target of Sh4 billion, absorbed by the treasury, while the six-month paper attracted Sh1.368 billion against a target of Sh10 billion, also absorbed.

The one-year paper which targeted Sh10 billion only attracted Sh6.327 billion worth of bids and government took Sh5.291 billion from the bids received.

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