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Capital Markets

Investors horizon shortens as 91-day paper back in high demand

Central Bank of Kenya
Central Bank of Kenya. FILE PHOTO | NMG 

Demand for government short-term debt has improved but remains depressed in the wake of reduced subscription as investors remain on the sidelines amid increased market uncertainty.

Central Bank of Kenya (CBK) received bids worth Sh19.61 billion in the auction last week against Sh24 billion it offered investors, an equivalent of 81.7 per cent uptake.

The subscription for the Treasury Bills follows sharp drop to 59.5 per cent and 35.6 per cent subscription in the previous two weeks with CBK having received Sh14.29 billion and Sh8.5 billion respectively.

In latest auction, CBK accepted Sh19.51 billion with marginally increased yield for 91-, 182- and 364 day paper bills at 7.212 percent, 8.121 percent and 9.11 percent respectively.

The 91-day bill, however, remained in high demand with CBK receiving bids worth Sh8.79 billion against Sh4 billion, compared to182-day and one year paper bills which received bids worth Sh4.45 billion and Sh6.38 billion respectively against Sh10 billion for each.

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The three-month paper has previously for several weeks been the worst performer, with the turn reflecting short-term view of investors. "The 91-day T-bill was oversubscribed, indicating investors' preference for the short term paper. Investors are unwilling to lock in their money now due to increased uncertainty over the direction of interest rates," Sarah Wanga, head of research at AIB Capital, said.

The subscription also follows a Sh21 billion nine-year tenor infrastructure bond issued in the week.

The CBK, the fiscal agent in the debt markets, received bids worth Sh37.84 billion with investors placing an average rate at 12.051 per cent.

CBK, however, accepted Sh35.39 billion with a coupon of Sh10.85 percent on the bond favoured by pension funds and long-term insurers.

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