Capital Markets

One-year Treasury bill rate hits 11.27pc as Central Bank takes Sh45bn


The National Treasury building in Nairobi. FILE PHOTO | NMG

The return on the 364-day Treasury bill has hit a high of 11.27 percent from 11.17 percent to mirror the effect of continued aggressive bidding by investors in the government paper.

The notable spike in the returns offered by the longest-date short-term security has come as the Central Bank of Kenya (CBK) accepts Sh45.29 billion from this week's Treasury bill auction which closed on Thursday.

The 91-day paper remained the most attractive of the three papers on offer with bids received having stood at Sh34.63 billion in contrast with Sh8.84 billion and Sh1.863 billion in offers for the longer tenured 182-day and 364-day instruments.

Read: Sharp increase in treasury bill rates signals costly bank loans

Despite the demand for higher yields by investors, the CBK acceptance stood at Sh45.29 billion to nearly match bids at Sh45.34 billion with the government's fiscal agent under pressure to meet redemptions of Sh50 billion during the week.

Yields on the 91-day and 182-day paper have also been on a steady increase and closed the auction at 10.41 and 10.853 percent respectively.

The continued lift to interest rates on government securities is due to an uncertain interest environment which has been characterised by high inflation leading investors into demanding a high-risk adjusted return on holding the government securities.

The CBK is expected to come under even more pressure during next week's T-bill auction as it seeks to mobilise Sh48.38 billion to meet redemptions and Sh24.39 billion in new borrowing requirements for the period.

The auction, which has registered a 188.9 percent performance rate, underpins the return of liquidity to the money markets in a week that also marked the first fully subscribed Treasury bond at the primary sale since the start of the year.

The CBK mobilised Sh20.3 billion from a new three-year bond after investors bid Sh20.74 billion against a target of Sh20 billion.

Read: Investors flock to T-bills eyeing higher returns

The 103.72 percent performance rate for the bond was against wide expectations of the paper's under subscription based on apathy by investors in previous bond issuances.

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