Treasury bills share of domestic debt rises to 14 percent

Treasury Bonds

For the Treasury, the increase in the share of T-bills in its domestic debt mix is a negative on its efforts to lengthen the maturity profile of the debt and avoid short-term refinancing risk.

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The share of the government’s domestic debt in the form of Treasury bills has risen to an 18-month high following the heavy subscriptions in October and November by investors locking in higher returns before interest rates fell.

Central Bank of Kenya (CBK) data shows that as of January 7, T-bills accounted for 14.28 percent of the government’s outstanding domestic borrowings, up from 12.72 percent in September and 11.38 percent in June 2024.

This translated into an increase in the actual value of the outstanding T-bills by Sh222.42 billion or 36 percent to Sh838.1 billion in the six months between June 2024 and January 2025.

This pace of increase was more than three times that of the first half of last year when the outstanding stock of T-bills rose by 12.6 percent or Sh68.94 billion.

In the second half of last year, the stock of debt in the form of Treasury bonds went up by 5.6 percent or Sh257 billion to Sh4.88 trillion.

This was slightly lower than the increase of 8.3 percent in the first six months of the year, indicating that, unlike T-bills, the government accumulated debt via bonds at a steady pace throughout 2024.

The sharpest rise in the stock of T-bills came in October and November when there was a rush to lock in the securities as interest rates on government securities retreated in line with the cut in the CBK’s base rate from 13 percent in August to 11.25 percent in December.

In 10 T-bill auctions between October 3 and December 5, investors offered the government a total of Sh723 billion—an average of Sh72.3 billion per week—with CBK accepting Sh384.8 billion, or just over half of these offers.

The T-bill rates had touched highs of between 16.72 and 16.99 percent in March 2024 and held at these elevated levels for several months before starting a rapid decline of between 5.1 and 6.6 percentage points between October and early December.

For the Treasury, the increase in the share of T-bills in its domestic debt mix is a negative on its efforts to lengthen the maturity profile of the debt and avoid short-term refinancing risk.

As of June 2024, the average time to maturity for Kenya’s overall public debt fell to 7.8 years from 9.4 years a year earlier. On domestic bonds, the time to maturity shrunk to 7.5 years from 8.6 years in 2023.

The period to maturity for debt is one of the measures the Treasury takes into account when assessing the risk associated with public debt, and the overall sustainability of the debt.

The shorter the duration, the higher the refinancing risk, since the government has to repay large amounts of debt in a short period, straining its liquidity.


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