Capital Markets

Short term Treasury bill auctions fail to hit target on low investor appetite

The Central Bank of Kenya building in Nairobi. PHOTO | FILE
The Central Bank of Kenya building in Nairobi. PHOTO | FILE 

Appetite for short-term government debt remained low as investors were yet to fully return to the market, with only a slight improvement from end of last year when one auction had to be entirely cancelled.

The low appetite saw government debt issues undersubscribed across-the-board.

Results released by Central Bank of Kenya (CBK) for the Treasury bill auctions on Thursday show bids amounted to about half of the offered amount, with most investors opting out of the market in the latest Treasury bills auction.

Bids amounted to Sh6.2 billion while a total of Sh12 billion was being offered highlighting the low investor turn out.

“The subscription level for the T-bill remained low for the second week at 52 per cent. I think it’s just the slow start to the year as investors are still reassessing their position factoring in the expectations for this year.

“Yields still remain relatively stable at the same level for almost two months, and the low participation cannot be attributed to yields,” said Cytonn investments manager Maurice Oduor.

“We should start seeing participation in the T-bills picking up given that liquidity levels remain high in the money markets.”

The CBK report indicated that the yield rates generally remained unchanged.

The central bank sold a 182-day Treasury bill, with yields dipping to 10.46 per cent from the previous 10.47 per cent.

The central bank received bids worth Sh2.41 billion, representing a 40.18 per cent subscription rate.

The 364-day auction was equally undersubscribed with the CBK receiving bids worth Sh3.85 billion representing a 64.16 per cent subscription rate.

In the previous auction the government was able to raise only Sh2.2 billion out of the targeted Sh16 billion in the primary Treasury bill auctions as investors kept off the market on Christmas break.

The central bank said the auction of the one-year T-bill was cancelled even though it did not offer further explanation.

Treasury bill auctions can be cancelled when investors fail to bid or when they demand yields that the government considers too high.

Uptake of the Treasury papers is expected to continue in the year as institutions, including pension funds run away from the equities that often perform badly during election years.

Last year, daily equity turnover fell to a two-year low as local institutional investors hedged their bets.

The government is expected to continue borrowing from the domestic markets to finance its poll promises ahead of the General Election in August.