Bidders of government securities have this month turned their attention to the one-year Treasury bill attracted by what analysts say is its recent relatively good yield.
In the two auctions for the 364-day paper held this month for Sh12 billion, in total investors bid Sh24 billion (a 200 per cent subscription rate) making it the most popular tenor of the three on offer. Out of this, the government has taken up Sh19.8 billion.
In contrast, the subscription rate in October for the one-year paper stood at 99 per cent, with offers of Sh23.8 billion versus the offered Sh24 billion in four auctions.
The one-year paper normally offers a higher return compared to the six- and three-month tenors, but through October it was paying the same interest rate as the half-year paper, at 10.3 and 10.4 per cent on average.
This month, the distortion in the rates is slowly correcting as analysts say investors are pushing for the change.
“The 182-day and 364-day ticked up by 0.6 basis points and 10.8 basis points, to 10.3 per cent and 10.8 per cent respectively. This indicates investors are widening the spread between the two bills, in a bid to correct the market,” said Genghis Capital in a fixed-income brief.
When the two longer T-bill tenors are offering the same interest rate, the six month paper is deemed to be offering the more attractive risk-adjusted return.
This month, bids on the 182-day Treasury bill have amounted to Sh22.8 billion—with Sh17 billion taken up— representing a subscription rate of 190 per cent on the offers of Sh12 billion.
In October investors put up Sh43.3 billion in the paper against offers of Sh24 billion, which was Sh20 billion more than they bid on the one year paper.
On the 91-day Treasury bill, the bidding levels have tended to match the amounts on offer, even though its interest rate has climbed from 7.8 per cent at the beginning of October to 8.2 per cent last week.
This month investors have put up Sh8.6 billion on offers of Sh8 billion, while in October they bid Sh16.4 billion against offers of Sh16 billion.