1 year T-bill yield hits double-digit

Investors continued to show higher appetite for the 364-day Treasury bill compared to the other tenors in last week’s auction as the interest rate on the paper went double digits, putting in bids worth Sh24.4 billion against a target of Sh10 billion.

The market has been starved of short-term bonds in recent auctions, forcing investors to turn to the one-year T-bill.

Central Bank of Kenya said in its weekly T-bill auction report that the three tenors of T-bill together attracted total bids worth Sh33 billion (against a target of Sh24 billion). However, the shorter 91-day and 182-day papers were undersubscribed, with the majority of bids going to the 364-day paper.

The higher bid rate on the paper was also helped by rising liquidity in the money market as activity resumes following the Christmas and New Year holiday break. .The interbank rate, whose movement is an indicator of liquidity levels in the market, has come down by more than half since mid-December, when it stood at a high of 11.3 percent, while the shilling has also weakened this week partly as a result of the higher liquidity.

“The interbank rate averaged 4.061 percent (on Thursday trades) from 4.86 percent in the previous session. The shilling depreciated against the greenback to close at 102.25,” said Genghis Capital in a note.

While the bidding was high on the short-term securities last week, CBK continued to reject offers deemed expensive, even as the Treasury faces high redemptions this month.

The regulator accepted just Sh16.4 billion out of the Sh33 billion that investors offered, resulting in new borrowing of just Sh3.5 billion due to maturities of Sh12.9 billion.

On the one-year paper, acceptances stood at Sh11.8 billion from bids worth Sh24.4 billion, on the 182-day, CBK took Sh3.3 billion from bids worth Sh7.3 billion, and on the 91-day it took up the entire Sh1.26 billion that was on offer from investors.

Investors in the one-year paper were, however, able to eke out a higher rate from the regulator at 10 per cent last week, compared to 9.9 per cent the previous week. The interest rate on the 91-day T-bill came down slightly to 7.31 per cent from 7.34 percent the previous week. On the six-month paper, the rate was little changed, going down from nine percent previously to 8.9 per cent last week.